South Bay Home Inventory Soars - realtor says the "leveling off could take years"
In a June 26 news release, Shorewood Realtors reports that the inventory of south bay homes for sale nearly tripled in May when compared YOY with May 2005. 215 homes were available in May 2005, while 623 homes were available in May 2006.
Not only are the beach cities of El Segundo, Manhattan Beach, Hermosa Beach, and Redondo Beach experiencing a huge jump in inventory. Hawthorne, Lawndale, Torrance, and Inglewood are also experiencing big jumps.
The number of sales in the beach cities is down 27.7% YOY from May 2005. May 2006 saw 164 homes sold, while May 2005 saw 227 homes sold. However, in spite of big inventory jumps, Hawthorne, Inglewood, and Torrance actually experienced increasing sales. Palos Verdes Estates also saw a higher number of sales, though it appears to experience big price swings, due in part to the relatively small number of transactions.
The number of days on market for the four beach cities was 37 days in May 2006 versus 26 days in May 2005.
A related article in the Daily Breeze (June 28: South Bay real estate sellers find fewer, pickier buyers) that quotes Mike Collins of Shorewood reports that the market is "transitioning from a seller's market to a buyer's market", but "we're not there yet". Higher interest rates and "the reluctance of many home buyers to sell their home to trade up" are cited as factors in the market slowdown. "A lot of people... purchased their homes in the last five years who have marvelous loans, great fixed rates for over 30 years... don't want to come out and play... they're happy."
An RE/MAX Beach Cities realtor who is also quoted in the article says, "I've been through a few of these cycles and I would expect this adjustment to last for a while, until prices get real again - however long that takes. I'm thinking years."
For all you bubble psychology watchers, isn't it interesting how these realtors still won't even mention unmentionable words like price decline in their press writeups, when they are fully aware it is inevitable? The politically correct term is now leveling off.
posted by bearmaster at 6:45 AM
1 Comments:
Hi there North Torrance boy,
According to a guy a know from a realtor family, it is normal for inventory to rise at this time of year, with the school season ending and families wanting to relocate during the summer. So I don't think a rise in inventory is itself a sign the bubble is bursting. It is when buyers quit buying that things start to get dicey. We know they are getting more reluctant to buy under the current conditions, but there are still enough buyers to propel things along a little while longer.
Nor do I think that an economically sound area is necessarily immune to a bursting bubble, if that economic soundness has been fueled by excessive credit. In the charts published here at the beginning of every month, what we are seeing is a contraction in real estate dollars transacted, which can be interpreted as a measure of how much income is being earned in the real estate industry. That is definitely contracting. And we know that a large percentage of new jobs created over the past several years have been in the real estate industry. A market that is merely slowing can shake the foundations of that so-called economic stability.
Home sales have not dried up by any means. Some areas of Torrance are continuing to do very well, maybe in part because the homes there are viewed as more affordable.
So the buyers are still buying but they are looking elsewhere. The pin has not arrived yet. And when it finally does arrive, we will not know definitively why it arrived at precisely when it did, any more than why the Dow Jones Industrial peaked exactly on September 3, 1929, or the Nasdaq peaked on March 10, 2000. All we can say about those points in time is that public mood pendulum swung to the sell side.
By the way, I meant to post a link to the Daily Breeze article and forgot - I have updated the post with the article link. One of the realtors quoted says that many recent new homeowners are locked in with fixed rate 30 year loans, are happy with the terms, and are content to stay put, meaning they aren't looking to trade up and reenter the market as buyers. I don't have statistics on the all the mortgage loans originated in the area, but if he is right, then the region has priced itself beyond the reach of most and buyers are looking elsewhere - like Torrance. I sort of view the whole thing like throwing a ball in the air - at some instance in time it is perfectly motionless before it starts its descent to earth. Well the ball is slowing and approaching that point where acceleration hits zero.
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