From the South Bay bubble scrapbook

It's time to grit our teeth and be prepared for some rebound in the local housing markets. I don't know how much of a retrace there will be, or how long it will last, but I suspect it won't be much, because inventory has been creeping back up, at least in 90278. The stock market, too, is hitting new highs (at least the Dow), and it is not showing fear or giving any sign of trouble ahead, as it has historically done. There is some truly awful economic data out there, but the cheerleaders on CNBC and elsewhere spin it and explain it away, as is typical in the mass psychology of economic and market peaks.

In an earlier post I wondered out loud if the bubble could be shifting to the low end. Another possibility is that we could be getting a bifurcated market, where the credit bubble is moving from the middle range to the lower end, and perhaps to the upper end. One reason I think about this is because Centex is raising its prices on the Fusion townhomes in Hawthorne, not lowering them. Not by much, but the change is symbolic of the fact that there is demand. Residence A, which once started at $517,000, now starts at $520,000. Residence C once started at $601,500 and now goes for $610,500. Residence D once started at about $601,000 is now $611,000. And when this project was first getting started, I think the tentative price for Residence A was in the $400,000's. Residence A units in particular would be considered fairly "low end" for the area - probably standard for Hawthorne but this place is trying to pretend it's in Manhattan Beach, so Centex is trying to convince you it's a great deal for Manhattan Beach!

Another indication of why this market could be bifurcating is illustrated here. Here is a decent house, which with some beautification would make a fine living place for somebody, but apparently it's going to be torn down and some luxury condos are going to be built in its place (you have to click on the picture to really read the sign). It's pretty bad when a realtor can't or won't sell a mid-range house, but is fine with tearing it down to put up some high-end condos. It always infuriates me when I see this going on. This is exactly what happened to the lovely house across the street from me, which would have made a great (more relatively affordable) house for a family, but it was torn down and two higher-end condos put in its place. If you've read my prior posts on that house across the street, I strongly suspect that the family in that house is unable to make their payments. Maybe they would have been able to comfortably make the payments if they had bought the original house standing there, which sold about three years ago for about $620,000.

A lot of homes have recently been sold! The garage sale signs are getting so thick on these telephone poles that they are crowding each other out.

I swear I did not post the sign in the photo below. It was obviously posted by a lender who's trying to make money off of refis.

You'd think with all the press about the more creative mortgages that they'd be banned by now. Or discouraged. Or frowned upon. Nope. Zero down makes a good selling point, as shown by this open house sign (click to see). And by the way, what's with the hand made signs? Weren't they able to afford some more polished and professional looking ones?

This photo cracks me up. There is a little sliver of Manhattan Beach (90266) on the east side of Aviation Blvd. And there is a complex of townhomes on Aviation Way called Manhattan Pointe that officially are in 90266. The big selling point here is that it is Manhattan Beach, not some wannabe like Redondo, even though Redondo Beach is literally on the other side of this little street. I took a flyer but there is no price listed. Nor is the property listed in Zip Realty. Oops, I forgot. If you have to ask the price, you can't afford it. That realtor, by the way, is probably one of the most prominent realtors in the area. I believe he has a business built around sports star relocation to Manhattan Beach.

My conclusion from all this? The builders aren't scared, they are plowing ahead with their plans to build luxury condos. Buyers aren't scared, they aren't seriously thinking about affordability yet, they still go for "zero down" like flies to dog poop, even though there is literally a sign hanging in this neighborhood saying that home values are dropping! (Why am I getting a vision of lemmings running off a cliff?)

All that's been happening this year is that the wind got knocked out of price momentum. That means that some realtors are working a lot harder to maintain the incomes they've achieved in recent years, and a few realtors have probably gotten out of the business because there are fewer slices of pie to go around. Higher-end realtors are still doing OK. Overall, there is still no fear. Maybe that's in store for 2007.