The median can be skewed if the mix of properties change. For example, imagine 5 properties sold last year for 100, 100, 200, 300 and 400, respectively. The median is 200. This is what the market looked like last year — lots of low end homes selling. Now imagine that each of those properties sold again for 10% less, but, two additional high end homes sold. The data set now looks like this: 90, 90, 180, 270, 360, 360 and 360. Your median is now 270. It looks like the median has gone up, whereas each individual property is still losing value. It’s a weakness of the median — it tends to overstate the decline in the beginning of a real estate crash, and overstate the recovery towards the end.

Many real estate observers have predicted a rise in median this year due to this effect. And like I said, that’s exactly what we’re seeing here in Orange County. Sounds like you aren’t getting more high end properties selling in Big Bear, so you may be right about prices bottoming there. Each market is indeed different.

Orange County is a tale of two markets. The sub $500k market is down 40%+ in prices, and is likely close to bottom. The high end market is not down nearly as much (in fact, many sellers want a premium over their 2006/2007 purchase price!), but inventory is piling up and volumes are anemic — we have over 10 years of inventory in some high end price segments! To me, that foreshadows a violent price correction. When I say I expect the crash to resume, I am mostly referring to the second leg — the high end homes. In OC, that’s anything $1.5M and above. We largely avoided the subprime problem, but it’s going to get ugly here.

You are right, the buyers are certainly out there. I’m one — I’ve been waiting to buy my move-up home for 3 years. But like you said, it’s a question of properly priced properties. Banks properly price their properties, so they sell with multiple offers. Organic sellers often don’t, so their properties sit on the market.

Anyway, I enjoy your posts. You do good statistical work and you are a realist about the market, both good and bad. Thanks.

I don’t run the Case-Shiller index for Big Bear, cannot say that I know how to run that but if you could provide the stats I should look at, I would like to give it a shot. From what I know of it, it measures the rate of apprecation or deprecation for 20 of the markets in the U.S. I know the April 09 numbers showed that prices were still dropping, but at a slower rate than the previous month and several % points less than the Jan. numbers. Every market is unique, some higher, some much lower or even positive.

The fact that the median price in Big Bear has gone up the past 4 months, plus for the first time in over 2 years from a year of year standpoint, that is good news. And it is not just for seasonal reasons. Just looking at last year during the same time frame, the prices were mixed, some up and some down. The fact is that it is hard to draw any conclusions based on the limited amount of sales we see every month. But, if this continues, and inventory stays down, I’d argue things are getting better for sellers.

I don’t see how prices can go much lower or crash as you say, even with all the bank owned properties still to come on the market. I think we are pretty close to a market balance on prices and that is the reason for the increased sales. There are plenty of buyers out there right now, just not enough properly priced properties. There is a reason why many bank owned homes in the area are seeing 2-6 offers. Plenty of buyers out there.

As to your questions, last June there were 9 homes sold over $500,000, this year, 10. Not a huge difference. Higher end homes in Big Bear have hit the selling wall rather than increasing dramatically. Nearly 90+% of what is selling is under the $300,000 price mark.

Another important point to note is that cash sales have increased over 100%, YTD with 49 in 2008 compared to 108 in 2009. That tells me many people think now is a good time to invest in Big Bear real estate.

Either way, it will be interesting to see how things go over the next year. Thanks again.

Regardless, it is clear that the artificially low interest rates, govt incentives and the temporary rebound in the stock market has stabilized the housing market — at least for the short term. My guess is that the crash resumes after the summer selling season.