Wednesday, August 30, 2006

Quick neighborhood tour to pass the time...

We went for a neighborhood walk tonight, the first dogless one in ages. I took my camera to record any interesting developments.

It's amazing how the character of this neighborhood has changed since we moved here in 1995. These pictures on Warfield Avenue are typical recent construction. And the construction is still going on strong:

The thing that struck me was the For Lease and For Rent signs. There isn't a lack of them. There are probably more properties for rent and for lease than a few years ago when sales were booming, when people were leaving their rentals to buy the dot condos.

Which got me to thinking. In previous years, abandoning the apartment/rental life to buy a bubbleminium was the rage. But sales volume has slowed quite a bit. So where are the former apartment dwellers who left vacancies in their old places going? And are non-apartment rentals there because the owners are unable to sell their properties?

Every single unit in this 3-on-a-lot is for sale. The red Keller-Williams sign is sharing a yardarm with another realtor, whose sign is in the back.

While I'm at it, I'll post a few photos I took in Hermosa Beach a few Friday nights ago.

This is typical Hermosa Beach, about a block off The Strand.

This house is just about the nicest looking house on The Strand. We call it the "library house." A lot of properties on The Strand look like junk, but this really stands out.

And here are some views from on the pier. This is looking northeast toward Manhattan Beach.

This is looking toward south Redondo. Toward the hills lies Torrance 90505 (Walteria), and in the hills is Rolling Hills, Rancho Palos Verdes and Palos Verdes Estates.

Yes, we live with great weather here by the ocean. That's why people pay millions of bucks to live here.

I'll end this with a picture of sunset.

Another suspected foreclosure at 4112 Naatab

I'm starting to wonder if I am the neighborhood jinx. This home was once a lovely 4 bedroom home with one of those beautiful leafy palms in the backyard. I lived next to it, across the street, for eight years (photo extreme left). The owner was elderly and eventually Alzheimer's got the best of her, poor thing, and she went to live with her daughter. The family put the house on the market for $599,000 and sold it for $620,000 in July 2003, in the midst of the mania (it's been going on for years here).

That lovely property was torn down to make way for two bubbleminiums. Both units sold in December 2004, the front one for $899,000 and the back one for $890,000.

You know what they say about how the late stages of a mania sucks in the minorities? A minority family occupied unit A, and they had a flashy Corvette in the driveway to go along with the house. Over the last few months I noticed I had not seen any sign of them, and then this morning I found the realtor yardarm in the front with the brochures.

It all looks very mysterious. The bubbleminium is not listed with Shorewood or Zip Realty or one of other local realties, it is listed with Jordan Real Estate, which is headquartered up in Antioch, somewhere up north located in the general area of Stockton, Walnut Creek, and Berkeley. Visit their website and you'll see they barely have a website, as of the time of this writing.

The asking price is $1,200,000, yet another Fantasyland asking price.

This may be the second foreclosure I've noticed this month within a close radius of my north Redondo apartment.

Monday, August 28, 2006

Other measures of Beach Cities market activity, July 2006

Shorewood Realtors has graciously provided their latest report numbers for July.

We notice that the moving average of average days on market (DOM) for the beach cities for all townhomes, condos, and SFRs sold in July remains pretty level at 36. The shape of the graph tends to spike up around New Year's, when the sales season is traditionally slow, and tends to come down into the spring and summer months, rising very slightly into summer. So far, we haven't seen a big leap here yet. Unfortunately, DOM is a number that can easily be manipulated, because listings expire and relist, disguising the problem of some homes being on the market for many many monts! Is DOM manipulation so pervasive now that it tells us nothing? We'll know the answer to that if this autumn we continue to see the market deteriorate as rapidly as it has been by other measures, but DOM does not budge.

How about our own measure of Supply Strength (our PC term for demand weakness)? That seems to be pressing steadily upward. In June the 3 month moving average was 2.63, for July it's at 3.07. You Elliott Wavers out there, is that a nice five waves up from May 2005 (with 5th wave the longest), with a brief sharp correction, then resumption of the trend?

Supply strength, along with real estate $$$ volume transacted, have shown themselves to be very good leading indicators of a trend change in our local real estate markets. Notice how the supply strength was extremely close to 0 in the May-June 2005 timeframe. That was probably a sign of a market peak. From there, the trend has pushed up. Too bad this wasn't known over a year ago as it might have helped some wary homeowners to pick the right time to sell!

You'll be seeing the August real estate $$$ transacted charts this Labor Day weekend.

Sunday, August 27, 2006

Milestone - foreclosure on a real estate brochure!

Well this is the first for me anyway! A bank-owned foreclosure being advertised on a real estate brochure, on a bubbleminium built very recently (2003). Not some little post-war box with some poor eccentric elderly person living in it. And what's even more astounding is that the asking price is a full-blown fantasy asking price, not a realistically marked down asking price. If this keeps up, somebody will be foreclosing on the banks!

Long-time blog readers know that when I talk about specific addresses in my neighborhood, I scramble addresses. This is partly to protect the privacy of any parties involved from random Google searches, though you are probably able to figure out how to unscramble the address to get the actual address. Anyway, the address in question is 3022 Naatab Unit A., not even a block away from me.

According to Zillow, the Zestimate for this bubbleminium is $880,173. The value range is $783,354 - $985,794. The property has 2,521 square feet. The fantasy asking price is at the top of that value range: $984,900. According to Zillow, a sale occurred on 4/24/2006 for $890,137. This sale does not show up in Domania. But according to Domania, the first sale of this bubbleminium was March 2004 for $810,000.

OK, so was this recent sale to some phantom flipper who promptly got into trouble? Or maybe it was a legit sale to a totally clueless individual who got blindsided by the downturn.

I wanted to know a little more about Boardwalk Properties, so I took this photo:

See all the icons that look like the Monopoly board game? I wouldn't exactly compare these bubbleminiums to Park Place and Boardwalk. But people are buying and selling houses with fake money, that's for sure!

Friday, August 25, 2006

Daily Breeze: L.A. County Home Sales Fall, but prices still rising

There isn't much new here in this August 24 Daily Breeze article (link will expire) either. Home sales fell 25.6% in Los Angeles County in July YOY.

The 10 cities in the state with highest median home prices in July 2006 are:

Burlingame          $1,425,000
Calabasas           $1,138,750
Lafayette           $1,170,000
Los Altos           $1,652,000
Los Gatos           $1,030,000
Manhattan Beach     $1,457,750
Mill Valley         $1,198,000
Newport Beach       $1,375,000
Rancho Palos Verdes $1,200,000
Santa Barbara       $1,047,500

The cities with the greatest median home price increases in July YOY are:

Barstow             32.1%
Compton             24.8%
Hercules            35.1%
Inglewood           24.3% 
Laguna Niguel       24.8%
Lodi                24.9%
Loma Linda          28.3%
Mill Valley         31.3%
Morgan Hill         33%
San Juan Capistrano 29.7%
Taft                58.1%

Thursday, August 24, 2006

L.A. Times: California Home Sales Take a Plunge

The August 24 Los Angeles Times story by Jesus Sanchez is just a confirmation of what you already know, dear blog readers. But the feature I find most interesting about this story is that this the first time during this downturn that I've seen the L.A. Times use the word "plunge" in a housing story. Remember - a month ago the word from the L.A. Times that I was noticing was "Relax". The prevailing thought then was - "Gosh darn but those silly buyers were not going to gain anything by waiting - they are going to miss out on the rebound!" Wow, isn't it amazing that we can see such a shift in psychology in one month. Now the California Association of Realtors admits that sellers are maintaining unrealistic price expectations.

For the entire state, sales of existing homes are down nearly 30%. Compare that to the nationwide figure, which is down 21.6%. California sales volume is falling faster than the nation's volume as a whole. Riverside and San Bernadino counties saw a drop in sales volume of over 40%. Silicon Valley area is showing a fall of over 30%.

Median prices have slipped 0.7% in San Diego, 2.4% in Sacramento, and 3.7% in the Palm Springs region. The Los Angeles area median sales price is up to $581,140, up 6.8% YOY. In Orange County, it is up to $710,920, up just 0.6% YOY.

So far I am not seeing any sign of a rebound in the August sales figures.

Tuesday, August 22, 2006

From the South Bay bubble scrapbook

I just recently got a new camera and we've been playing with it. I've been wanting to post more bubble photos here and now I've finally got a decent camera for the job.

My significant other has even managed to stitch together two movies (OK, movie is stretching it a bit) of the Centex Fusion at South Bay construction site. They're actually made from very long JPG files but you can view them as panoramas in QuickTime, if you just move your computer mouse to the left or right.

If you want to view these movies, I recommend you right click on the links below and save them, then open them up with your QuickTime. If you try viewing it in the browser, it takes longer to download and you don't get as big a picture.

The first movie (right click for .mov file) starts with a view of Bruce's bike, but beyond it, looking north on Aviation Blvd, you can see the big Fusion sign. Start scrolling to the right and you can see some flags and a little of the construction. Keep scrolling and you'll be looking east at the Federal Building, then you'll be sort of looking east along Marine toward the north end of the Northrop Grumman facility, which is just across the street from the end of the Metro Green Line. Continue scrolling and you are looking south along Aviation Blvd toward the interection at Marine Ave. Continue scrolling, and you're now looking west, towards the gas station, ball field, and another Northrop Grumman facility. Then it wraps around looking north again.

The second movie (right click for .mov file) starts a bit closer to the Fusion construction site, sort of looking northwest. The site is immediately south of the MTA Green Line car barn. Due north, you can see a Marriott hotel. Keep scrolling and you'll pan across the construction site. Oh boy, lots of sardine can housing!

OK, on to some photos.

The Westwood sign twirlers are busy, as you can see. I think they are out there every Friday. My supervisor did in fact confirm for me that UCLA is trying to sell these former student housing condos quickly, before some other big condo project nearby hits the local market.

And now for Playa Vista. Blog readers know that up to now the Playa Vista market has been on steroids and still doing very well relative to the rest of the westside and south bay. I took these pictures off the express 3 Santa Monica bus last Friday evening, coming home from work. The area is starting to look like one loooong stretch of condos interspersed with business parks - nothing but construction as far as the eye can see....

On to Torrance. Every Saturday we religiously haul our Red Ryder wagon to the Torrance Farmer's Market at Crenshaw and Jefferson, at the north end of Charles Wilson Park. Standard Pacific Homes is building an enormous project on Oak Street just north of the park. As best as I can tell, this megaproject consists of: the Village on Oak - Laurel, the Village on Oak - Acacia, and the Village on Oak - Bayberry. I just can't wait for all that to be built so I can fight my way in to the Farmer's Market every Saturday morning.

These shots are from driving south on Oak Street toward the park. The construction site is on the east side of the street.

These photos are from Jefferson Street, which runs east-west along the north side of the park. In the second picture we're actually standing in the Farmer's Market parking at the north end of the park.

That's all for the moment. I really need to quit now since I get up at 4 AM.

Dow Jones: So Cal Housing Market Could Pull Homebuilders to New Lows - the market "is in the early stages of a tsunami wave of cancellations"

Thanks tofriend JesseL (from the bear boards) for this link!

I actually have some good photos of contruction projects by Standard Pacific and by Centex. When I can find a Java applet that lets a viewer look at a JPG as a panoramic view, I'll put the photos up.

I'm not yet seeing any signs of price cuts at Centex Fusion at South Bay, the big project just a few blocks away from me. Starting prices are still at about $517,000 to the best of my knowledge, which is still higher than what the builder originally planned.

S Calif Housing Market Could Pull Homebuilders To New Lows   

08-22-06 09:23 AM EST

NEW YORK -(Dow Jones)- Watch out, California. Your housing market is about to get 

The Southern California housing market is "in the early stages of a tsunami wave of 
cancellations and price cuts," predicts JMP analyst Alex Barron. Home builders with 
big exposure to this market could potentially take a hit that's even bigger than the
beating many took in Florida.

Barron, who recently returned from a three-day tour through Southern California, said 
he sees similarities between market conditions in this area and those in the troubled 
Florida market.

"Demand has hit a wall" in Southern California as skyrocketing prices over of the 
past few years have made homes less affordable, said Barron. Builders have responded 
by offering higher incentives and steep price cuts, and by allowing buyers to put 
down shockingly small deposits - of less than 1% - on homes, he said.

"Deposits below 1% are a very ominous sign as it signals to us that demand is very 
weak and homes have now become very unaffordable," said Barron.

"If it's a $700,000 home and suddenly the builder has cut the price for similar homes 
to $650,000 or $600,000 - and you only put down a $5,000 deposit, why wouldn't you 
walk away from it?" he asked. "We would expect cancellations to rise dramatically in 
coming months as it will be relatively painless to walk away from such a small 

He sees California's market conditions following in Florida's footsteps by only a few 
months. Florida has led the quickly deteriorating housing market for many of nation's 
homebuilders, where huge inventory gluts have forced builders to slash prices and 
offer extraordinary incentives in order to move sales.

However, a key difference between the two states is that Florida's woes were driven 
primarily by speculative investors and flippers who flooded the market and drove up 
prices over the past few years. Many of those same investors were forced to dump the 
homes they purchased back onto the market at fire-sale prices when the market 

By contrast, speculative investors were never as big in California. Instead, 
homebuilders themselves have been driving the inventory buildups in the Golden State, 
according to Barron.

"One of the more troublesome developments we saw in Southern California was that most 
builders were spec building entire communities at a time, with very few sales to 
support this level of construction," said Barron. "In one instance, we saw a 
community of about 100 homes where there were over 20 complete unsold homes, and yet 
the builder was already building the next 100 homes in the community next door with 
five sales."

That particular community was being built by Beazer Homes USA Inc. (BZH). Beazer, 
however, isn't alone, Barron said. He sees similar speculative building from other 
major publicly traded builders, including D.R. Horton Inc. (DHI), Lennar Corp. (LEN), 
Meritage Homes Corp. (MTH), Centex Corp. (CTX), California Coastal Communities Inc. 
(CALC), and Brookfield Homes Corp. (BHS).

"Many wrongly think that 'if you build it, they will come.' Well, they're not coming 
anymore," said Barron. As a result, he said that homebuilders that sell homes in 
California could be potentially hit even harder than they were in Florida.

"It appears to us in Florida, the one left holding the bag was the flipper or 
speculator," said Barron. "In Southern California, it appears to us the one left 
holding the bag is the homebuilder." He added that California is the state where the 
builders have most of their capital parked.

Michael Carliner, an economist with the National Association of Home Builders, 
disagrees that Southern California could be the straw that breaks the camel's back.

He said California tends to have longer land and zoning approval processes than many 
other states, such as Florida. As a result, he said California tends to be 
"underbuilt" in general.

In 2005, the number of housing starts per 1,000 people in California stood at 5.34, 
which is below the national average of 7, and far short of Florida's 15.08 and 
Nevada's 17.58, he said. In the first six months of 2006, the number of starts per 
1,000 people was 4.7 in California, 6.7 nationally and 13.8 in Florida. This means 
the pace of construction in Florida far outpaced California based on population 

Still, if speculative investors account for fewer buyers than in Florida, then they 
will also be responsible for fewer of the unsold homes in the market.

Data gathered from LoanPerformance, a mortgage information and analytics company, 
appear to back this up. Nationwide, the number of speculative buyers has surged in 
the past two years, with cities in Florida, Nevada, and Arizona dominating the top 30 

LoanPerformance found that 16.8% of all mortgages issued for new home purchases in 
1995 and 16.7% of those issued so far in 2006 were given to speculative investors and 
those purchasing vacation homes. This is up from 11.7% in 2003, 9.7% in 2002 and 7.9% 
in 2001.

Markets with the biggest percentage of speculative and vacation home buyers were in 
Myrtle Beach, S.C., and Naples and Fort Myers, Fla., where these investors 
represented 66.5%, 54.1% and 48%, respectively, of new mortgages in 2006. California 
markets only held down two of the top 30 spots, according to LoanPerformance.

Joe Snider, senior credit officer at Moody's Investors Service, said he still 
believes speculative investors were quite prominent in California and isn't convinced 
that public builders will take a tougher hit in California than they did in Florida.

However, Snider was surprised to hear that public builders were constructing entire 
communities on spec right now.

"The last time homebuilders did something like that was in the late '80s and early 
'90s, and some of them just didn't make it," said Snider. "There were seven 
homebuilders that went bankrupt in 1990, and the reason in every case was that they 
were long on land and they were financing it with short-term debt."

Snider said homebuilders learned tough lessons back then, and most no longer use 
short-term debt to finance their land purchases.

"If they've gotten back to a practice of building entire communities on spec - like 
they did in the late '80s and early '90s - that would definitely be a worrisome 
trend. But I've seen no evidence of that yet," he said.

Barron downgraded two builders that have large exposures to California - Standard 
Pacific Corp. (SPF) and Beazer Homes USA Inc.Standard Pacific gets about 49% of its 
revenue from California while Beazer currently gets about 20%.

Many of the major builders rely on California for a big percentage of their total 
revenues, including California Coastal Communities, 100%; Brookfield Homes Corp., 
73%; William Lyon Homes Inc. (WLS), 72%; Lennar Corp., 32%; KB Home (KBH) , 31%; D.R. 
Horton, 25%; Centex, 24%; Hovnanian Enterprises (HOV), 24%; M.D.C. Holdings Inc. 
(MDC), 22%; Meritage, 21%; Ryland Group Inc. (RYL), 21%; and Pulte Homes Inc.(PHM), 

-By Janet Morrissey, Dow Jones Newswires; 201-938-2118 

Monday, August 21, 2006

DQNews South Bay Resale Activity for July 2006

According to DQ News, the July Monthly resale activity for the south bay area showed the following:

Zip     # SFR   Median   %Chg   # Condo  Median    %Chg 
        Sales   $SFR      YOY    Sales   $Condo     YOY
90045    38     765,000  -0.5      2     497,000   32.7
90245     7     730,000 -15.0      2     519,000    0.7      
90254    11   1,085,000 -23.9     12     810,000   -1.8   
90260    19     530,000   1.9      5     385,000  -22.7
90266    34   1,570,000   9.2      7   1,373,000   13.2
90277    16     990,000  -6.9     19     734,000   17.0 
90278    17     737,000  -6.1     27     685,000   -6.7

The beach cities charts below look strictly at resale activity for existing SFRs. The pink line is the raw %YOY change in the median price. The dark blue line is the %YOY on a doubly smooth 3 month moving average of the median price. I like to take moving averages because seasonal activity does not always "match up" (e.g., sometimes Easter sales fall more in March, sometimes more in April.) Beach cities zip codes are 90245 (El Segundo), 90254 (Hermosa Beach), 90266 (Manhattan Beach), 90277 (south Redondo Beach), and 90278 (north Redondo Beach).

Price gain momentum is hitting the brakes. Notice that with the exception of 90266 (Manhattan Beach), all the pink lines are pointing down and are in negative territory. Median prices have declined YOY for July for four out of five beach city zip codes. But we'll give the bubble denialists the benefit of a doubt here and look at the values of the dark blue line. On that basis price gain momentum has slowed to low single digits for 90277, 90278, and 90254, is practically 0 for 90266, and is negative for 90245.

Note: Without actually reviewing old copies of the Los Angeles Times, I cannot verify the accuracy of this data. The early data will contain a slight inaccuracy since I do not have data prior to June 2003 to accurately calculate moving averages. Some of my raw YOY numbers do not match the YOY numbers shown in the DQNews data published at the L.A. Times, though the direction of trends match.

Saturday, August 19, 2006

Daily Breeze: South Bay's Housing Market Running Out of Gas - "this market is correcting itself faster than what people expected"

Thanks to Judicious1, who gave me the heads up on this!

According to this August 17 Daily Breeze story, now some analysts admit that things are tanking faster than they expected. Some real astute mortgage agents are jumping into the credit repair business, "because people are up to their necks in debt". Not a sign of easy boom times ahead, in my opinion.

South Bay's housing sales market running out of gas
Area home sales are the slowest in nine years, with biggest dip seen in 90274 ZIP 
code. Year-over-year price trend also evens out.

Originally published Thursday, August 17, 2006
Updated Thursday, August 17, 2006

By Muhammed El-Hasan

July served as another reminder that the South Bay's formerly high-flying housing 
market has hit the brakes.

Most South Bay communities saw the number of home sales drop in July compared with a 
year earlier, with the greatest plunge -- 54.3 percent -- coming in the 90274 ZIP 
code of the Palos Verdes Peninsula, according to new information from La Jolla-based 
DataQuick Information Systems, which tracks real estate trends.

Also in July, most of the South Bay saw either a drop or stagnant growth in 
year-over-year home appreciation, with the biggest dip -- by 10.7 percent -- coming 
again in the 90274 ZIP code.

The South Bay's real estate market is following a regional trend. On Tuesday, 
DataQuick said Southern California home sales were the slowest in nine years.

Indeed, the housing market is slowing across California and nationwide.

The local DataQuick numbers are for all homes sold in July. Detached residences, town 
houses and condominiums were treated equally in the calculations of median price, the 
price at which half of homes sold for more and half for less.

Opinions on the slowdown range from sober acceptance of a return to a "normal" market 
to predictions of a severe correction.

"What it means is that this market is correcting itself faster than what people 
expected," said Patrick Duffy, an analyst for Costa Mesa-based Hanley Wood Market 
Intelligence, which tracks the real estate industry.

Of the 11 South Bay areas for which DataQuick provided statistics, only three 
experienced a year-over-year increase in home sales for July. Torrance, by far the 
largest and most active area, saw an increase of 6.5 percent in sales. Carson, also a 
large market, had a 5.4 percent increase.

Lawndale, a relatively small market where housing numbers can swing dramatically on a 
few transactions, saw an increase of 41.2 percent in sales. Even so, Lawndale's 
median home price still fell 1.5 percent to $512,000.

Hermosa Beach's median price fell 5.4 percent to $970,000 while Redondo Beach's 
median dipped 1.3 percent to $750,000.

Torrance, which represented nearly 30 percent of July sales for the South Bay areas 
cited in DataQuick's local data, saw the median price rise a modest 1.8 percent to 

San Pedro had a 5.1 percent rise in home prices to $520,000, even as home sales 
dropped 41.3 percent.

After the past few years of double-digit annual appreciation, the South Bay's housing 
market is "going to be more normal," said Sandra Sanders, owner of Re/Max Palos 
Verdes and Execs in Malaga Cove.

Sanders said it was unclear how much of an adjustment to expect.

"I do feel like it has turned around, that it's more of a buyer's market," said 
Sanders, who oversees 500 real estate agents in the South Bay. "It's going to be 
better for us to service our buyers now that we can show them more than one house, 
and there's not the pressure that they have to buy the first house they see or else 
the price is going to go up. It's going to be more of a joy for buyers to buy."

And sellers will have to show flexibility in their price expectations, Sanders added.

At Carriage Realty & American Broker Loans in Torrance, business has dropped for 
mortgage processing, co-owner Warren Snyder said.

Meanwhile, business is booming at Snyder's other venture, American Credit Repair, 
because "people are up to their necks in debt," he said.

Snyder said he expects a steep decline in home prices over the next 12 months as some 
homeowners see their mortgage payments double when their variable-interest-rate loans
adjust to a higher fixed rate.

The slowdown, and decline in some cases, in home appreciation means that homeowners 
may not be able to solve their financial bind by simply selling their residence, 
Snyder said.

Duffy, the Hanley Wood analyst, agreed that homeowners are under increased financial 

"You have higher energy prices, higher gas prices, you have higher interest rates for 
adjustable mortgages and you have a market that's flat," Duffy said. "So, I think 
that's weighing very heavily on people."

Friday, August 18, 2006

Los Angeles Business Journal: Offices Shutting Down as Home Sales Plunge

This August 21 article in the Los Angeles Business Journal (login or subscription may be required) should really come as no surprise to us. We know that median home prices have not "officially" declined year over year, so homesellers who sell now are still making a good profit. But we also know that number of sales are down dramatically, and, we know that real estate dollar volume is down (we measure that here every month), which means that those in the industry could be seeing declines in their net income. It may be getting tough to be a residential realtor. And the commercial real estate we are seeing emptying out first is - no surprise here - real estate office space.

Apparently a glut of new realtors has hit the industry here the same way that gluts of new condos have hit the housing market. On a rather amusing related note, a prominent and hugely successful brokerage in the south bay area notes that a "former top fashion model" has joined its brokerage team, along with a veteran agent "who goes by only her first name". If open houses this year have had to use Easter egg hunts, fake families, string quartets, gourmet chefs, and celebrity book signings just to get people to show up I don't know if adding glamor and mystique to the local realtor's office is going to help. (By the way, those string quartets, gourmet chefs, and celebrity book signings were for open houses back east, I don't think those gimmicks have hit California markets quite yet.

But let's get back to the L.A. Business Journal article:

Offices Shutting Down as Home Sales Plunge

Los Angeles Business Journal Staff

A shakeout has begun to hit the local residential real estate sales industry.

As home sales have plummeted throughout the region, a host of local and national
residential sales offices have closed recently amid a wave of branch consolidations.

The Business Journal has confirmed that in the last 60 days at least six residential
brokerage branch offices have closed or are in the process of doing so, most on the 
Westside or in the San Fernando Valley. Hundreds of brokers have been consolidated to 
other offices, and some have left the industry.

Several said the consolidation wave has just begun.

“I’m seeing closings going on all over Southern California,” said Syd Leibovitch, 
president and owner of Beverly Hills-based Rodeo Realty, an independent residential 

The main culprit: a precipitous drop in home sales as interest rates have gone up. In 
July alone, the number of home sales in Los Angeles County plunged 34 percent to 
6,146 compared to last year, according to HomeData Corp., which compiles home sales 
data for the Business Journal.

July’s drop follows six consecutive months of lower home sale volumes compared to 
last year’s historic high levels. That has lengthened the average time a home stays 
on the market to 36 days from 22 days a year ago, according to the California 
Association of Realtors.

Home prices are still rising – albeit at a much slower 7 percent annual clip instead 
of the 20 percent plus jumps of recent years – sales volume is much more important 
than price for residential brokerages. With fewer homes changing hands each month, 
commissions and revenues are down at brokerage offices.

“If you’re not making enough in the office, you have to close it down,” Leibovitch 

The situation has been compounded by an influx of newly minted agents hoping to make 
a quick buck in the recent overheated housing market.

In the last five years, the number of licensed Realtors in California has roughly 
doubled to 504,000, according to the California Association of Realtors. As a result, 
agents on average are handling five transactions each year from a high of 11 in 2000.

“Any time you get under six transaction sides represented in a year, a drop in our 
membership rolls soon follows,” said Robert Kleinhenz, deputy chief economist with 
CAR, which now comprises over 200,000 members.

The actual number of branch closures is difficult to pin down, but several in the 
industry said it’s clear that few if any offices are opening and several have closed 
or will close. Some believe the number of closings could be big. 

“I believe you will see 20 to 25 percent of brokerage offices closing in the next 18 
months,” said Jimmy LaPeter, a Century 21 franchise owner.

That in turn would likely lead to thousands of residential real estate agents being 
laid off or leaving the industry voluntarily. In the slowdown of the early 1980s, 
roughly 30 percent of agents left the industry; closer to 40 percent left following 
the real estate crash in the early 1990s, according to the California Association of 

Sotheby’s closure
One of the biggest offices to close lately is in the heart of Beverly Hills: 
Sotheby’s International, a unit of real estate brokerage giant Realogy Corp., is 
closing its Rodeo Drive office and relocating most of its 150 brokers to other 

One broker who recently left the Beverly Hills office of Sotheby’s rather than be 
relocated said the market has definitely turned.

“It’s gone from being overheated to more normal very quickly and that’s meant 
downsizing,” said Philip Buck, who just joined the Beverly Hills office of Rodeo 

Earlier this year, Sotheby’s cut agents’ commissions as the company attempted to 
collect more money to cover fixed overhead costs. Then, in late June, word got out 
that offices in Beverly Hills and Palm Springs would be shuttered by the end of 

Another agent, who asked that her identity not be revealed, said business got so slow 
at the Beverly Hills office that it became a joking matter when the former office 
manager asked agents if they had a sale in escrow.

“It used to be half the office would raise their hands and recently it’s just been a 
few,” she said. “(The office manager) would jokingly say, ‘Well, we can always start 
an ice cream parlor in back.’”

Sotheby’s declined to comment for this story.

But some brokerages see the slowdown as an opportunity. Rodeo Realty is trying to 
capitalize on the industry downsizing by snapping up talented brokers from closed 

To that end, Leibovitch is hosting a “recruiting party” this week at the Beverly 
Hills Hotel, with the express aim of trying to get some of these displaced brokers on 
his team.

Another player trying to capitalize on the downturn is LaPeter, who owns 10 Century 
21 franchises throughout Southern California. LaPeter is looking to acquire up to 
dozen additional Century 21 franchises; if the deals are completed, he said 
consolidations might follow.

“With the market changing, it’s going to be tough for a lot of brokers to stick it 
out,” said LaPeter, adding he may consolidate his own offices in West Covina and West 
Hills, though a final decision has not been made.

Also closing offices in the region is Coldwell Banker, another unit of Realogy Corp. 
Coldwell has already closed offices in Agoura Hills and Burbank.

“We didn’t lose anybody; we just consolidated,” said Jann Berman, spokeswoman for 
Coldwell Banker Residential Brokerages in Los Angeles and Orange County. “We are 
always looking to make sure we are making economic sense and our strategy is to be 
smart about our operating costs.”

Corporate, independent closures
These closures, along with those at Sotheby’s, are taking place against the backdrop 
of a nationwide consolidation by joint parent company, Realogy Corp., which just this 
month was spun off from Cendant Corp. Realogy also is the parent company of NRT Inc., 
the largest owner and operator of residential real estate brokerages in the U.S.

In a conference call on Aug. 10 in conjunction with the release of second quarter 
results for both Cendant and Realogy, Cendant President and Chief Financial Officer 
Ron Nelson said the slowdown in the California and Florida real estate markets were 
largely driving the consolidations.

“Realogy has worked to rationalize NRT’s fixed costs through office consolidation, 
headcount reduction and other moves,” Nelson said.

In many instances, the consolidations are working in reverse of the brokerage 
acquisitions that Cendant undertook in the 1990s. Those offices that were acquired 
latest, such as the Sotheby’s office in Beverly Hills, are the first to close.

Big brokerages are not the only ones to consolidate offices.

“Independents are also vulnerable; they may not have the deep pockets to get through 
a prolonged slowdown,” Leibovitch said.

In Los Angeles, Boardwalk Properties, recently closed its Santa Monica office and 
consolidated the agents there to nearby offices. Steve Aguilar, Boardwalk’s 
president, said that the immediate trigger for the closing was a buyout offer for the 
office space from the landlord, but he admitted that the home sales slowdown was a 

“It definitely played into our decision. The timing of the closure couldn’t have been 
better,” Aguilar said.

Another independent brokerage, Troop Real Estate Inc., has closed its Agoura Hills 
office, consolidating the brokers into its Westlake Village branch.

Currently, membership in the local chapters of the Realtors’ association continues to 
rise, Kleinhenz said. But he said he expects that to reverse next year. Indeed, the 
mindset has already changed among agents from the “hop-on-the-bandwagon” mentality of 
just a year ago.

“Right now, I’m seeing disillusionment from agents, who are now realizing that this 
is the normal market and you just have to work a little harder,” said Bill Toth, 
owner of Windermere Real Estate in Burbank.

Toth said he is already seeing some agents – the “Johnny-come-latelys” as he calls 
them – leaving the industry. “These are the people who were seeking to make a quick 
buck. Those who will be left will be those who make a living and depend on it and 
have built up relationships, clientele and trust over time.”

Staff Reporter Daniel Miller also contributed to this story.

Just an observation on 3391 Swetham and pricing

I've been watching this property since the beginning of the year. To the best of my knowledge, it was listed early this year at $889,000. Since then, I've seen this property relisted a few times, with the asking price gradually inching down to $819,000 (I may have missed a few steps here), then $806,000, and then finally this morning, to $798,000.

That's just barely over 10%. For the most part, sellers here are still extremely reluctant to cut their asking prices. I sense they believe the market will come roaring back this autumn. There are a few other properties here in 90278 with asking prices cut from original asking prices way way back, somewhere between 10% and 16%. There are lots of listed properties with a token 3% to 5% knocked off the original asking price, and that seems to be happening rather quickly now (in days), as opposed to sales seasons of prior years, when that 3 to 5% came off if the property ended up sitting a few months. There isn't any sign of "drama pricing" here yet.

It will be interesting to see what the autumn sales season brings.

Note: This photo was taken early this year.

Tuesday, August 15, 2006

L.A. Times: Southland Home Sales at a Nine Year Low

According to an August 15, 2006 article by Annette Haddad of the L.A. Times, price appreciation is "taking a haircut" and home sales volume, which has fallen for the last eight months, has now fallen to nine year lows in July here in Southern California.

Sales were 27% lower than July 2005, at 22,712 homes, and the fewest since July 1997. The median price, on the other hand, is still trending up, +4.9% July YOY to $492,000. That is the slowest YOY rate of appreciation since 2000. And the median price came down -0.2% from June.

In what may be the Understatement of 2006, DataQuick analysts declare the market is "heading into a lull". The 22% sales volume drop between June and July was the most since DataQuick started keeping records back in 1988.

San Bernadino County homes continue to enjoy double-digit gains, though sales volume there, too, is slowing, along with Riverside, Los Angeles, Orange, Ventura, and San Diego counties. For July, YOY median price changes were as follows: San Bernadino, +11.6% to $366,000; Los Angeles to $520,000; Ventura to $634,000; Orange +6.3% to $639,000; Riverside +7.5% to $414,000; San Diego -1.8% to $487,000.

Gee, whatever happened to all that insatiable demand the local realtors and economists were spouting off about just late last year? What happened to those bidding wars in which you had to write a letter to the owners begging them to sell you their house? Doesn't everybody want to live here?? These economists and realtors who comment on the current conditions did not say anything last year about sales in southern California dropping more than 25%, and they do not recognize the magnitude of what lies ahead.

Saturday, August 12, 2006

L.A. Times: Home Price Gains Keep Shrinking - in downtown LA, "it's glut city"

In an August 12 story by Los Angeles Times bubble watcher Annette Haddad, L.A. County's home prices rose at their slowest pace in six years.

The median price of a sold home in Los Angeles County in July reached $520,000, up 6.6% YOY, and up just $3000 from June. This is a huge change in a market that has been enjoying annual gains of 20%. The number of home sales is down 25% YOY, and some analysts still insist on talking of a "soft landing" in spite of that figure. One DataQuick analyst admits that the real estate market is "slowing more rapidly than we've seen in a long time." This same analyst then attempts to rewrite history by claiming that "everybody" has always said a "soft landing could include minor price declines."

Median prices have started to fall in over a dozen zip codes, including here in the south bay area. In fact this article states that the Torrance (90501) median price for SFRs has fallen -7.4%, the most of any Los Angeles County zip code. However, the article does go on to say that such declines are not yet "widespread". Median prices are still gaining at "nearly half double digit rates" in the "more affordable" areas.

In downtown L.A., the ratio of condos for sale to every one sold this time in 2005 was 1 to 1. Now it is 7 to 1. One realtor says "it's glut city".

Mortgage brokers are blaming interest rates, noting that the monthly payment on a $300,000 mortgage loan today is 15% higher than in August 2005.

The article gave the May-July sales figures for existing SFR sales along with July YOY price changes, for the top 10 and bottom 10 Los Angeles County zip codes.

                                     % change     Median     % change
                           Number of    from      price       from
Area             ZIP Code homes sold    year ago (thousands)  year ago
L.A.             90061        63        +1.6%      $407       +31.3%
L.A.             90003       135       -10.6        420       +31.3
Compton          90222       108       +13.7        385       +28.3
L.A.             90011       105        +9.4        410       +28.1
Compton          90220       144       +21.0        400       +26.8
L.A.             90037        60        +5.3        445       +26.2
L.A.             90063        51       -10.5        395       +25.8
L.A.             90018        54       -19.4        525       +25.0
L.A./View Park/  90043       122        +1.7        550       +25.0
Windsor Hills
L.A./Watts       90002       143        -0.7        385       +25.0
Woodland Hills   91364      120        -13.7        787        -0.1
Claremont        91711      108        -12.2        583        -0.4
West Hollywood   90046       64        -28.9      1,095        -0.5
Arcadia          91006       85        -19.8        714        -2.6
Glendale         91208       57         -9.5        815        -2.7
Manhattan Beach  90266      108        -19.4      1,450        -3.3
Agoura Hills     91301       65        -47.2        820        -4.1
Palos Verdes Pen 90274       74        -32.1      1,400        -4.9
L.A./Rancho Park 90064       51        -34.6        895        -6.6
Torrance         90501       69         -5.5        560        -7.4

Question for blog visitors - why do you suppose the article is showing "May through July" sales instead sales only for the month of July? Are the July-only numbers so terrible they don't want to put them in print? And do you think downtown L.A. is starting to sound like downtown San Diego about seven months ago?

Wednesday, August 09, 2006

Daily Breeze: Condo-conversion moratorium being urged - "It's threatening the middle class"

In an August 9 article in the Daily Breeze, Dan Laidman reports that L.A. councilman Bill Rosendahl is urging a moratorium on condominium conversions, driven in part by conversions in the 11th district (Westchester, Playa del Rey area up to Brentwood and Pacific Palisades). Middle class renters have been forced out to make way for pricey condos.

Business interests greeted the news with "chilly reactions", pointing out that building owners are missing out on opportunities to profit from conversions. The head of the Apartment Owners Association argues that the city should compensate those landlords. "It's immoral and unethical to interfere with the free market and with the property people own", he says. (Note: parts of district 11 are rent controlled.)

OK, I am very much in favor of allowing a free market to operate. If the free market had been operating then some of these landlords would have been all along charging a rent that the market would support. I just wonder - it's all very well and good to talk about free market profit making opportunities but will these same landlords be singing a different tune as the housing market dives?

Daily Breeze: San Pedro making way for big condominium project

According to an August 7 story in the Daily Breeze by Dennis Lim called Boom ... then it's gone, San Pedro imploded its old Pacific Trade Center to make way for a 16 story, 318 unit high rise condominium project. According to local councilwoman Janice Hahn, the condo project was "symbolic" of San Pedro's future.

When I read this, I had to ask myself why the trade center was no longer needed. Is it because we on the west coast no longer export sufficiently to require it? Perhaps this implosion was also symbolic in a way that councilwoman Janice Hahn had not considered - of an economy in long-term deterioration. And if this condo project is symbolic of a future where we live like a bunch of packed sardines, I don't know about the rest of you, but I want no part of it. The good councilwoman chose to see the bright side instead, saying it was symbolic of "San Pedro's transition into a vibrant, highly desirable place to live..." Perhaps this sardine canning condo project is indicative of another aspect of our future, massive cheap new construction being dumped on the market making it more difficult for owners of existing homes to sell.

Given how the housing market appears to be deteriorating, though, there could be a possibility that building plans can change.

And one good thing came out of the implosion! Local firefighters used the rubble as an opportunity to practice search and rescue drills.

Note: I did not link to the Daily Breeze story on this blog page because that newspaper's stories quickly become inaccessible. I'll post it in the comments.

Tuesday, August 08, 2006

Los Angeles Business Journal: Pricey L.A. Housing Crimps Recruitment - "As soon as we mention that the position is in L.A., they hang up the phone"

Wow, I hadn't thought of the details of how the out-of-control Los Angeles housing market was affecting people besides what they had to pay for housing. But employers are being hit hard and dealing with the fallout, according to this August 7 Los Angeles Business Journal story (registration or $$ required).

Federal government agencies are especially being hard hit. Salaries are set by Congress so the Federal government is unable to raise the salaries of those in L.A. county to help employees meet their housing costs. It's true that Congress allowed a 10% adjustment to the Los Angeles area but for those who live here you know that is laughable. There has been an exodus of workers from this area and the government is not having much luck finding replacements. At a more local level, the vacancy rates among firefighting and law enforcement agencies is extremely high. Gives you a warm comforting feeling, doesn't it. Who's going to bring order when people hit the streets rioting because of housing costs? The median-salaried ($50,000) federal worker with a family of 3 actually qualifies for low-income federal housing assistance!

It wouldn't be too much of stretch to say that a credit bubble of our own making is actually endangering our national security.

Public and private companies have more flexibility. Some have moved all of their operations out of state, such as Nissan Motor (to Nashville, Tennessee), or are expanding their operations only in other states, such as Mercury Air.

The article says that employers are having great difficulty helping prospective recruits find homes for rent. Will that remain so? I've been seeing more rentals in my area (Redondo). Personally, I think market pressures will keep the rental market in control, because I've witnessed some homeowners, unable to sell their homes, put them up for rent instead. But that's just my opinion, and I don't have a way to number-crunch that.

Here is the full article:

Posted date: 8/7/2006

Pricey L.A. Housing Crimps Recruitment

Los Angeles Business Journal Staff

As chief executive of a mid-sized Los Angeles company, Joe Czyzyk spends more time 
than ever these days trying to minimize the impact of L.A’s stratospheric housing 
prices on his bottom line.

Czyzyk, chairman and chief executive of Mercury Air Group Inc., readily admits to 
having to make “significant housing adjustments” to recruit mid-level and top-level 
executives. Over the last few years as housing prices have soared, those adjustments 
have ranged as high as $75,000 in additional compensation.

“Offsetting housing costs has actually become a line item on our financial 
statements. It’s a big number,” said Czyzyk, who also tries whenever possible to 
steer new recruits to the company’s other offices in Colorado Springs and Houston.

Even as housing prices appear to have reached a plateau – with the median price 
falling back slightly last month to $550,000 – they are still more than double what 
they were five years ago and more than double the nationwide median of $230,000.

Employers all over the L.A. area are dealing with the fallout.

Recruiting from outside the region has become increasingly difficult, and companies 
that traditionally picked up a portion of the housing costs are now finding that 
those costs are exploding.

The impact has been extreme on federal government agencies, which employ more than 
53,000 people in L.A. County. Unable to raise salaries that are set by Congress, 
federal agencies have experienced an exodus of employees seeking cheaper places to 
live and have been unable to find replacements. Some agencies, particularly those 
with firefighters and law enforcement officers, have vacancy rates over 40 percent, 
leaving them barely able to perform their basic functions.

“This has been building for years, but it’s critical now because housing prices are 
now way beyond the ability of most federal workers to afford,” said Kathrene Hansen, 
executive director of the Federal Executive Board of Greater Los Angeles, a federal 
entity that coordinates federal activities at the local level. “Agencies don’t have 
enough people to staff vital functions, like inspecting ships coming into port, 
staffing the courts or processing immigration and social security claims.”

Her board issued a report late last month that stated “thousands” of “important 
positions” are vacant, with the problem getting worse. “We simply cannot find and 
keep enough good people. The foundation is crumbling,” it stated.

Blocking transfers
Chester Widom, a partner in the Santa Monica-based architecture firm WWCOT, said the 
situation has gotten so bad for his company that there’s a concern it won’t be able 
to staff up quickly enough to take on more projects.

“We’ve always tried to help with some of the housing costs. But if someone who lives 
in a large $500,000 home in another state wants to find an equivalent home here, 
that’s over $1 million. We can’t make up that difference,” said Widom.

Local federal law enforcement agencies have now taken the extreme step of forcibly 
transferring employees to their L.A. offices from other parts of the country – 
employees who sometimes are unable to bring their families along because they can’t 
afford to house them. Many federal agencies here are also blocking almost all 
transfer requests and forcing employees to work overtime, Hansen said.

While federal agencies have traditionally lagged the private sector in pay, the 
doubling of housing prices in the Los Angeles area in the last five years has turned 
a perennial problem into a crisis. The slight adjustment to L.A. area salaries that 
Congress has allowed – about 10 percent above the national average – has not kept up 
with the region’s spiraling housing costs.

Indeed, the disparities are now so great that the median-salaried federal worker in 
Los Angeles with a family of three who pulls in $50,000 a year now qualifies for 
low-income federal housing assistance.

To combat the vacancies, federal agencies here are mounting a push to get Congress to 
grant housing allowances for employees in Los Angeles and the Bay Area of up to 60 
percent of base salary, just as the military already does.

But the last time such an effort was tried, at the peak of the last housing boom in 
1990, the effort fell flat because lawmakers from other states objected. “It was the 
‘Anywhere But California,’ treatment,” Hansen said.

Private sector companies, though, have more flexibility. As housing prices have 
soared here, they’ve been able to shift operations to lower cost areas. One of the 
major reasons why Nissan Motor Corp. chose to move its North American headquarters to 
Nashville was the lower cost of living, especially housing prices.

And while some companies have relocated entirely, many more are keeping a presence 
here but are growing their operations in other lower-cost states, as Mercury Air is 

Those that can’t easily shift operations have found creative ways to cope with the 

For example, at Los Angeles-based Psomas, an engineering firm, executives are taking 
advantage of technology to have out-of-state engineers work on local projects.

“We can actually have engineers in Salt Lake City work on projects in Southern 
California that don’t have to live here. With housing prices the way they are, that’s 
a tremendous cost-savings,” said Jacob Lipa, president of Psomas.

As for bringing people in from out of state, that’s becoming nearly impossible these 

“We offer them relocation money, but it’s not enough,” Psomas said.

Affordable housing
Many companies are offering to pay closing costs and points for their employees’
mortgages, but are now seeing those costs explode. Others are bringing in corporate
relocation consultants to walk potential recruits through the costs and pitfalls of 
moving to L.A. before the candidates agree to take the posts.

“Before, we used to be brought in at the very end of the process, to help the recruit 
actually move. Now, we’re being called in earlier and we spend most of our time 
working to convince the person that ‘Yes, despite what you may have heard, you can 
find a place to live here that you can afford,’” said Barbara Blake, co-owner of 
downtown L.A.-based Quest Relocation Group.

Blake said that most outsiders don’t realize how many different neighborhoods with 
different housing price ranges there are in the L.A. area. “We almost always find 
something that a job prospect can afford in an area they want to live in,” she said. 
The only exception: homes for rent. “There’s almost none left right now in this 

Many times, though, companies never get a chance to dispel the notion that it’s 
impossible to find an affordable place to live in Los Angeles.

“Many candidates don’t even get as far as coming out here for the interview. As soon 
as we mention that the position is in L.A., they hang up the phone, saying the 
housing costs are way too high,” said Betsy Berkhemer-Credaire, co-owner of Berkhemer 
Clayton Inc., a retained executive search firm also based in Los Angeles.

Others who do come out see the sticker-shock first hand and often leave.

That’s what happened at the Los Angeles Biomedical Research Institute, a non-profit 
research lab just outside Torrance.

“We tried to recruit a very competent researcher from Birmingham (Ala.), but he was 
looking at comparable housing being five times more expensive,” said president and 
chief executive Kenneth Trevett. “He never came back for a second visit. We had a 
professional meeting of the minds, but the issue was housing, pure and simple.”

In cases like that, increasing a salary offer 10 percent or 20 percent or offering a 
substantial lump sum relocation payment up front doesn’t come close to bridging the 

As a result, Berkhemer-Credaire said she now recommends that companies looking to 
fill local positions stick to the L.A. region for recruiting. That way, most 
candidates are likely to already have a suitable place to live and don’t have to 
worry about buying or renting a place.

“It’s a greater and greater plus on your resume to indicate you live in Los Angeles 
and even more of a plus if you live in housing that’s relatively close by,” she said.

Monday, August 07, 2006

Los Angeles Business Journal: Buyers Biding Time as Home Sales Plummet

The tone of this article (requires login or $$$), is one of reluctance to admit there is a problem.

Realtors are still claiming that potential buyers sitting on the sidelines waiting for a big price drop will end up disappointed. "It's just not in the tea leaves". Everybody's anticipating that sales will "pick up" later this year, once the market absorbs the impact of the Federal Reserve's rate hikes. Low affordability along with the "interest rate situation" are blamed for the "wait and see" attitude of buyers.

The county median price in July fell to $550,000 from $555,000 in June. (That's just month-to-month.) Median days on market for L.A. County in June is 35.9, compared to 22.4 days in 2005, and, as of June, inventory levels were up to 6.4 months, compared to just over 2 months in 2005.

"Nearly every corner of the county saw [July] sales drop by a third or more." The slowdown is hitting hard those communities that saw "healthy" sales volume last year. Redondo Beach was singled out, with July sales volume down 48%. San Pedro's zip codes were down 46% to 50%.

First time buyers are holding back, and those existing homeowners who want to move up are held back by new higher payments and taxes, in spite of sitting on a "mountain of equity".

There seems to be a widening gap between the ultra-rich and the lower-income folks. 37 zip codes have median prices above $1 million, compared to 31 zip codes a year ago. Only 23 zip codes in L.A. County still have median prices $450,000. Prime markets such as Beverly Hills and Malibu are seeing a lot fewer but much pricier sales.

So there you have it, realtors use tea leaves to do their forecasting, and the sales volume we've been seeing the past several years has been "healthy". (Sure, with the interest rate doping that's been going on!) My guess is that the deflationary mentality taking hold will eventually catch up with even the wealthy areas.

This story is so wonderful, though, that I'll reprint the whole thing here:

Posted date: 8/7/2006
Buyers Biding Time as Home Sales Plummet

Los Angeles Business Journal Staff

Los Angeles County’s once soaring housing market continued its descent in July toward 
what appears to be a bumpier landing than many had predicted. Sales volume took its
biggest plunge yet this year and the median price dipped back to May’s level.

The number of home sales fell 34 percent to 6,146 – the lowest number for July in at
least three years. The figure was even 15 percent below January, typically a slow 
month due to the holidays, according to data provided to the Business Journal by 
HomeData Corp., a Melville, N.Y. company that tracks housing prices nationwide.

At the same time, the countywide median price of homes that sold – though 6.8 percent
higher than a year ago – fell to $550,000 from $555,000 in June. Real estate agents
say rising interest rates and lackluster appreciation not only are making prospective
buyers cautious, but many now appear to be holding out for bargains, anticipating 
that nervous sellers may be ready to slash asking prices.

“Nobody wants to make a wrong decision,” said Syd Leibovitch, president of Rodeo
Realty’s Paramount Properties Division. “But while the market is flattening, it’s
certainly not going down.”

Some real estate professionals anticipate sales will pick up later in the year, once 
the mortgage market absorbs the impact of successive Federal Reserve rate hikes, and 
if buyers on the sidelines come to believe that homes are unlikely to see the 
depreciations of the 1990s recession.

Of course, July’s price drop from the previous month could be temporary – such dips 
in the median price have been seen at least twice in the last 12 months. However, 
other data suggest the slowdown may not relent.

Slowdown Spreads
Until July, monthly sales volume this year had ranged 17 to 24 percent lower than 
2005’s historic levels. But compared to earlier months with scattered pockets of 
sales declines, parts of nearly every corner of the county saw sales drop by a third 
or more.

Even one of the county’s most desirable suburbs, Calabasas, saw July sales drop 67 
percent to 22 homes, with the median price down 7 percent to $1.2 million. Longtime 
Calabasas Realtor Heidi Adams, who had open houses at two $1 million-plus homes on 
the last Sunday of the month, said interest rate worries and decreased affordability 
have amplified her area’s chronically tight inventory to depress sales volume.

Adams, a Coldwell Banker Realtors agent, said a tougher sales market elsewhere in the 
county also is having an impact. Most of her buyers come from the East San Fernando 
Valley or the Westside, and when it becomes harder to sell their current home in a 
more competitive market, it complicates a new purchase in her city.

At the other end of the transaction, Adams increasingly has serious talks with 
clients who have unrealistic expectations about what their properties can sell for in 
this market.

“If the house is really emotional, with a great yard and a great view, it will sell 
for the asking price in 30 days,” she said. “But for some properties I give it 30 
days – 45 tops – and then I say, ‘Guys, you’ve got to get real.’ ”

The California Association of Realtors estimates that as of June, homes in L.A. 
County were staying on the market a median 35.9 days, compared to 22.4 days a year 
ago. That has had the effect of building up inventory levels to 6.4 months in the 
county in June, compared to just over two months a year ago. Six months is generally 
considered a balanced market for both buyers and sellers.

The slowdown appears especially acute in communities that saw healthy sales volume 
last year. In the north end of the county, July sales were down 80 percent in Newhall 
from a year ago, 77 percent in Santa Clarita’s 91390 ZIP code, and 40 percent in 
Palmdale’s 93550 ZIP code.

In the East San Fernando Valley, Studio City was down 52 percent and Van Nuys’ 91401 
ZIP code 65 percent. On the Westside, Brentwood was down 72 percent and West L.A. 62 

Sales in five of Long Beach’s 11 ZIPs were down more than 50 percent. Redondo Beach’s 
90278 ZIP code was off nearly 48 percent. San Pedro ZIP codes were down 46 to 50 

Continued low affordability, along with the interest rate situation, are feeding a 
wait-and-see attitude, said Steven Thomas, president of Re/Max Real Estate Service’s 
Southern California operations. The national average on a 30-year fixed-rate mortgage 
stood at 6.72 percent at the end of July, compared to 5.7 percent a year earlier. 
That hasn’t helped a growing affordability problem that at the end of 2005 saw only 
14 percent of households in the county able to buy a median price home of $529,000, 
according to the state Realtor’s association.

“First-time homebuyers may sit on the sidelines waiting for that big price drop, but 
that’s just not in the tea leaves with the supply and demand situation here,” Thomas 
said. “Homeowners looking to move up are in a different situation. They may be 
sitting on a mountain of equity, but what’s holding them back is the realization that 
their new payments, and taxes, are going to be higher.”

High End Rises, Low End Shrinks
Indeed, 37 ZIP codes in the county now have median prices above $1 million, compared 
to 31 a year ago. At the low end of the market only 23 of the 268 ZIP codes in the 
county still have medians less than $450,000, generally either in the inner city or 
the rural north, such as $420,000 in Watts’ 90002 and $336,000 in Palmdale’s 93550.

And in prime markets, prices seem to have their own logic. In Beverly Hills, fewer 
but pricier closings catapulted the iconic 90210 ZIP code to a median of $2.85 
million, a 76 percent increase and the county’s highest median. The 10 homes sold 
were 63 percent fewer than a year ago.

Same story in Malibu, where the nine homes sold represented a 74 percent drop in 
volume but a 24 percent jump in median price to $2.2 million.

Still, fewer sales don’t always translate into higher prices. Los Feliz’s trendy 
90027 ZIP fell out of the million-dollar club last month, with its median falling 24 
percent to $895,000 on 19 sales, 37 percent fewer than a year ago.

“At the high end, most people have holding power,” said Rodeo’s Leibovitch. “They’re 
not desperate. People may read that the bottom’s fallen out of the market and make 
offers that are really low, but then they don’t get the house.”

Sunday, August 06, 2006

L.A. Times: Homesellers being targeted in latest Nigerian scam

Apparently homesellers in the area who advertise their homes on and are targets of the latest Nigerian 419 scheme, also known as the advance-fee scam, according to an August 6 L.A. Times story by Gayle Pollard-Terry.

The article highlights a professional realtor trying to sell her Huntington Beach house who still got taken in. Apparently her potential buyer was in England and the buyer had a Nigerian lawyer, which made her suspicious. The lawyer needed to come to Southern California to work out the details of the transfer, and wanted a few thousand dollars to make the trip over. Plane fare isn't a normal business expense in the escrow negotiation process. Warily, the realtor negotiated the lawyer down to $150 in expenses that she finally sent him. After she wired the money, the lawyer called a week later, said his office had been robbed at gunpoint, and he needed $350 more. At that point the realtor alerted the FBI.

Homesellers, don't fall for a scam like this! This lady was fortunate and "only" lost $150, but in my opinion, the instant she heard the word "Nigerian" she should have said I'm sorry, no deal and hung up. Panic and desperation can drive people to do foolish things. Don't fall for it.

Real Estate $$$ Transacted through July 2006 for Beach Cities

The spring of real estate $$$ that started seeping out of the beach cities as early as a year ago has graduated to a loudly babbling brook.

In terms of transaction $$$, July is the worst July for the beach cities in several years. Note in the raw data below how July 2006 compares to Julys back through 2002.

By a smoother measure, the trend is steadily stepping down.

Look at that YOY trend on the doubly smooth moving average. It peaked one year ago and started to decelerate. It actually went negative, meaning that real estate transaction $$$ started declining, around February and March of 2006. A few times in 2004, it looks like the trend came down to 0% but then bounced back up again. So far, we have not seen that bounce back.

Let's look at the westside. 90034 (Palms), is showing -35%, Rancho Park (90064) -30%, Mar Vista (90066) -6%, 90230 (Culver City), is still hovering around 0%, while 90232 (Culver City) is -16%. Venice (90291) is -20%, and Playa Del Rey is down -48%. On the other hand, Westchester (90045) is still gaining by over 13%, Playa Vista is still on steroids at 144%, and Marina Del Rey is gaining at over 7%, though it's trend has been declining steadily since January.

And now for the beach city zip codes. 90245 (El Segundo) is doing by far the best, having rebounded into April but now leveling off again. Its gaining at just over 2%. 90254 (Hermosa Beach) is -19%, 90266, the mighty Manhattan Beach is nearly -5%, 90277 (south Redondo Beach) is -40%, and 90278 (north Redondo Beach), is nearly -18%. Realtors must be feeling this!

How about the surrounding areas? 90250 (Hawthorne) looks still looks like it has a bit of strength, at over 4%. This is the zip code of Fusion at South Bay, so the sales will show up here. 90260 (Lawndale) has been on an uptrend since October 2005 and is now at over 12%. It's one of the most resistant areas. Inglewood overall is doing well. 90301 is up over 13%, 90302 is over 30%, 90303 is nearly 23%, 90304 is nearly 14%, and 90305 is on steroids at over 284%. 90501 (Torrance) is barely hovering above 0% at 2%, 90502 is at 34% though clearly trending down, 90503 is down nearly -14%, 90504 seems to be shooting up again, at over 16%, 90505 is also in an upshoot, at over 9%. 90717 (Lomita), on the other hand, is down nearly -16%. Keep in mind there are some huge new condo projects being built in Torrance.

Has the south bay beach bubble officially burst? Perhaps so, but I'd feel better seeing a confirmation from median price activity. So far, YOY gains in median prices for single family residences (SFRs) in the beach cities remain above 0%, though they appear to be generally working their way downwards. From all the other evidence, we'll get there. I'd also feel better when I see even the stronger surrounding areas starting to show negative YOY trends. My overall impression is that there are still desperate buyers out there who are priced out of the more expensive areas and who are unaware of the increasing weakness in L.A. County overall.

If I were forced to make a prediction about who is going to be blamed for the real estate bubble bust, I would say (other than the bloggers), that builders are going to be fingered at some point. They are dumping massive amounts of new construction on the market, and they'll be blamed for making it more difficult for existing homeowners to sell their homes. Cest la vie.

If you are new to this blog, you can find a more detailed explanation of these charts as well as breakdown by zip code at the Beartopia South Bay bubble tracker. Have fun!

Thursday, August 03, 2006

L.A. Times: Mortgage Default Notices up 45% for Los Angeles County

Los Angeles Times bubblewatcher David Streitfeld in this August 3 story reports on rising mortgage default rates in California.

For California as a whole, notices of mortgage default are 20,752, up 67% in Q2 YOY from 2005, according to DataQuick. Now for the understatement of the year: "If it continues long enough it could impact home values."

The article notes that few homes actually end up in foreclosure, because homeowners sell before the bank can seize the property. Well well, we shall see if that trueism holds up in this particular downturn. The number of actual foreclosures in the state is up to 1,901, up 215%. Hmm.

The least foreclosure activity that occurred during this cycle was Q3 2004, with 12,145 default notices. The most was during Q1 1996 with 59,897 default notices.

For Los Angeles County, default notices are 4,586, up 45% Q2 YOY.

One Pimco analyst quoted in the article takes a dig at "housing bears" (who, me?!?) saying the default notice rate, by historical standards, is still "insanely low". Did he use the word "insane" to describe the levels of housing prices that we've reached? On a scale of 1 to 10, he rates the current default climate a 1.

Should we hold a contest here to see how fast we are going to surpass that statewide Q1 1996 number? From 20,752 to 59,897 shouldn't be too much of a chasm.