Sunday, November 26, 2006

L.A. Times: Back to Location, Location, Location

Here's a little walk down memory lane for you. It seems like just a few short years ago we were reading about how homebuyers succumbed to the housing market frenzy and bid up properties in hot markets like Pasadena. According to some realtors, some properties got over two dozen bids. Some bidders literally paid other potential bidders to just go away. Serious potential buyers had to grovel by writing a letter to the seller and stating why the seller's property is so wonderful and the letter needed to include a picture of the buyer's family. Adorable photogenic pets and kids were helpful. Ahh, those were the days of real estate heaven, at least for the sellers and their agents. But those days are gone, right?

Not according to this November 26 story by David Streitfeld. The mania is alive and well. Busting a good bubble is hard to do.

The mania persists in a few very select places. The article describes an East Bay (San Francisco) location where a property was on the market for nine days and the price got bid up from $699,000 to $780,000. Another property had an asking price of $698,000 and a bid of $798,000 still wasn't enough to secure it.

The story makes a good point about how our old valuation standards were discarded during the mania. Remember when location mattered, and that you sought to buy the cheapest property in the best neighborhood you could afford?

In the unwinding of mania, we can expect things to play out in reverse, and that would suggest a return to the old traditional valuation standards. Since this bubble has barely begun to deflate, we can expect bubble behavior to reverberate, so we'll see these bidding wars again, though on a smaller scale, as the article suggests. In one way this kind of behavior reminds me of the sharp intermittent stock market rallies that occurred between late 1929 and July 1932, while the Dow continued its dramatic descent all the way down to 42 from a high of 380.

I don't know if he is still following this model or not, but in his book, Clif Droke expects a very mild recovery in the housing markets in 2007, "after a scary dip." These are the buy-the-dipsters coming out of the woodwork to pick up what they think are bargains. If his model is correct, that's what we could be seeing now. But once this phase is over, the true bloodshed begins.

In his book, home builder Robert Campbell flatly says that the old adage about location "is a myth. It's all about market timing." And he would know. It wasn't the great location of his money-losing properties that saved him during six lean years enduring the last real estate bust in San Diego, it was having savings to fall back on.

The decline this time around could end up being unique in its ferocity. If that is true, then location definitely won't matter, not if you want to be in a profitable position in your real estate purchases. The viciousness of the decline will take down everything. But the reverse is also true. At a market bottom, people shop quality. And location factors in to that quality.

More for the South Bay bubble scrapbook - Village on Oak

The Saturday after Thanksgiving was an extremely light day for shopping, as far as I could tell - hardly any traffic! That included the Torrance Farmers' Market at Charles Wilson Park. And we were running a bit later than usual. Anyway I thought I'd snap the progress of the multi-unit condo project called The Village on Oak. I've blogged about it before.

According to Standard Pacific Homes, there are three projects being built there. The Village on Laurel looks like it will be done last. Acacia and Bayberry are in progress.

I wish these home builders would offer a little more about the design and architecture of these places on their websites. I am not an architecture expert by any means. Standard Pacific Homes says nothing about style on its website. From the back, these townhomes vaguely remind me of the council houses of Great Britain because of the way they are packed together, though they have more style to them - what do you call it - pseudo Cape Cod? Colonial? Even though I sort of like the earthy tones of Fusion, within limits, I definitely prefer the style here.

We drove in past the entrance sign toward this structure here and encountered a security guard sitting in a car who said "Sorry, we're not open until 10!" I asked if it was OK if I took a few pictures and he said sure. This structure is the entrance to a community swimming pool.

I think the building here is part of Acacia. Prices are apparently from the mid-$500,000's. Too bad the lighting is so bad.

This looks like a Bayberry structure. Prices are from the high-$600,000's.

Here are some views of construction, from the Farmers' Market:

I pray it will never happen, but if I were faced with a choice of having to live at Fusion or in Village on Oak, I would pick Village, even though this location would add another 45 minutes to my already terrible work commute. It's big saving grace for me would be its proximity to the Farmers' Market, where we get probably 2/3rds of our food. If parents were faced with this choice, I would think the Torrance school district would be more desirable compared to the Hawthorne district.

Standard Pacific Homes also has some high density projects going on in Playa Vista and Marina Del Rey. I think I've caught a glimpse of some new houses overlooking some bluffs, visible from Lincoln Boulevard. Maybe that is the SP high end home project in Westchester.

It'll be interesting to see how the market holds up for the high-density housing, and how it holds up for the more upscale homes.

My poor significant other, who is normally a pure Libertarian, looked at the links for some of these Standard Pacific projects and then started ranting and raving about "market failure" and how the free market has no vision for what lies ahead. I have to agree with him. There is nothing green about these houses. The project in Marina Del Rey looks like the residents will be living in office suites, not homes. No solar power.

Our consumption problems have lead to energy supply problems and geopolitical problems and the average American home consumer seems relatively unconcerned.

Friday, November 24, 2006

From the South Bay bubble scrapbook

I just thought you might like to see something besides the bubbleminiums in north Redondo Beach or photographs of the depressingly high-density housing now being built in the South Bay.

We were up in Little Ethiopia (in zip code 90035) on Thanksgiving Day. The residential streets off of Fairfax and Olympic have some attractive properties. There are many duplexes. If somebody held guns to our heads today and told us we had to buy real estate, and all other factors stayed the same, in terms of our employment, this is probably one area we'd consider. I am not suggesting for a minute that we're thinking of buying, only giving a hypothetical scenario.

This first duplex has an empty unit in the front. We wandered in and discovered a private enclosed courtyard.

The properties here actually have enough lawn to do a bit of landscaping.

For some reason, the terra cotta color of this duplex just really jazzed me.

This single family residence reminds me of one of the prettiest properties in north Redondo, at the corner of Green and Marshallfield.

There weren't many trees planted in front yards, but this particular house has a tree out past the sidewalk. We noticed some shallow-rooted trees really doing damage to some sidewalks.

We drove across town and ended up at Fox Hills Mall, with a view of the Westchester "bluffs". Those big homes you see up on the hill are the newest McMansions in the north part of Westchester.

Wednesday, November 22, 2006

L.A. Times: Relative strength in California housing

The California housing market rationalizations continue to flow, as reported by Annette Haddad in this November 21 story. (Annette Haddad is not saying that, she's just reporting them.) We continue to hear great news about the economy and lack of overbuilding as reasons why prices have held up.

Yet we see upheaval in the lives of inhabitants of the low-income rungs of the economic ladder as these inhabitants must endure the major inconveniences of being displaced and having to cram into ever fewer and tinier rental dwellings. At the higher end of the economic spectrum, firms are leaving the state, and it has become virtually impossible for some industries to attract recruits into the area due to the high costs of housing. Some California residents are choosing to leave the state, citing how the finanial burdens of living here now outweigh the benefits. We can't continue to have it both ways.

In addition, many don't understand how underbuilding can morph into overbuilding practically overnight. It's about how social mood can change and compel us to reconsider what we formerly thought was valuable, thus affecting supply, demand, and price. The homes that the public was clamoring for yesterday are now suddenly overpriced, and demand has withered. What the public perceives as good value in housing can change very quickly. We can then experience conditions where the homes that everybody yearned for yesterday are now overbuilt today, because the public mood has changed.

The California Association of Realtors (CAR) chief economist Leslie Appleton-Young keeps chirping about how healthy the state economy is and how most people are keeping up with their mortgage payments. Of course, CAR is in a very credible position for making such claims, having reengineered their housing affordability index, because if they hadn't done so, than almost nobody in California could afford to buy a home by the old conservative standards. And being the good myopic economists that they are, they focus only on the low absolute numbers of notices of default and foreclosures, neglecting to mention the jump in default and foreclosure activity year over year and the implications of such a trend change.

One point mentioned is the fact that sales in California have not fallen "as much" as in other areas. Here, sales have fallen a mere 28% in Q3, compared with poor unfortunate Arizona, where sales fell 36%. Huh? That's supposed to be good? Is your D grade good because I got an F? It sounds to me like Arizona drove its car over the cliff sooner, that's all.

The other point mentioned in the article is the relative strength of the very high-end ($2 million plus) home market. Hmmm, at the time I write this, Melissa Data is not reporting any sales in Beverly Hills 90210, whereas all the other zip codes I have checked have reported some sales for the month of November. And Malibu 90265 is looking even slumpier than Manhattan Beach 90266 right now. How high end are we talking about? OK, I'll be impressed if Britney Spears gets her $13.5 million asking price on her Malibu digs, which is almost double what she paid for the place in October 2004.

Monday, November 20, 2006

DQNews South Bay Resale Activity for October 2006

According to the DQNews listings in the L.A. Times, the October monthly resale activity for the south bay areas showed the following:

Zip       # SFR   Median   %Chg   # Condo  Median    %Chg 
          Sales   $SFR      YOY    Sales   $Condo     YOY
90045      29     746,000  -3.7      5     375,000   36.4
90245      11     835,000  -0.5      2     562,000    2.1      
90254       7     865,000  -3.4      4     560,000   -4.3  
90260      12     500,000  -4.8      9     320,000    3.2
90266      21   1,430,000   8.3      1   1,513,000   35.7
90277      17   1,310,000  44.9     17     715,000    2.3 
90278      20     730,000  -5.1     25     720,000    6.3

County  5,489     540,000   3.8  1,336     410,000    1.2

The historical data I have for L.A. County condos, and for Manhattan Beach (90266) SFRs and condos is substantially different from what DQNews is reporting. Apparently DQNews has revised data that I do not have, but rather than delay this post any further I have decided to just post the flawed L.A. County condo and 90266 charts until I have time to reverse engineer their data. All other SFR and condo measures for the remaining beach city zip codes almost exactly match the DQNews report.

Overall, the gentle downward drift trend (pink lines are the moving averages) remain in place. The real 90266 data suggests the 90266 graphs should show stronger bounces. On the other hand the L.A. County condo data is somewhat too strong in the graph.






Los Angeles County

Other Measures of Beach Cities market activity, October 2006

Shorewood is suggesting that market signs are pointing to broader market stabilization. It is certainly true that the resale median home prices in the prior post do not appear to have been dented significantly so far this year. However, Shorewood's measure of average DOM, and our measure of (I-S)/S are strongly trending upward, suggesting to me that any so-called price stabilization is deceptive.

A note of caution - I am again having Shorewood check their numbers, because their data varies considerably from what Melissa Data reports in terms of sale volume in October. So these charts may just be preliminary.

Wednesday, November 15, 2006

L.A. Times: Region's home prices hold firm

sta.bil.i.ty n. pl. -ties. 1. The state or quality of being resistant to change of position or condition; steadfast, especially: a. Resistance to change, deterioration, or displacement. b. Constancy of character or purpose; steadfastness; c. Reliability, dependability.

Once again, the experts are telling us that home prices in Southern California "may be entering a period of stability", that we are "settling down into a steady state", which will "mean different things to different people", but it will be "fine for most people who have owned their homes for a while", as quoted in this November 15, 2006 story by bubble reporter Annette Haddad. Although October sales were at their lowest level in a decade, the rate of sales volume decline was at the smallest level in four months.

And then history is rewritten by describing the 1990's as a period in Southern California's housing market "when prices showed small or no gains after booming by double-digit levels during the late 1980's and falling during the early 1990's."

DataQuick notes that the rate of appreciation is slowing and could turn negative by late this year or early next year, but this is "normal in a market trying to reach equilibrium" after years of eye-popping gains.

The article quotes insiders that expect the final quarter of the year to be slowest for sales (due to seasonality) but expect "an avalanche" of homes to come off the market between now and the end of the year, and expect demand to keep softening.

Analysts seem mighty excited about how San Diego county was actually up over September by nearly 2%, though down YOY by -5.5%.

And here is the table I started filling in yesterday, with corrections and additions.

                                          Median price in
                     No. sold in     %     Oct 05 Oct 06    %
                Oct. '05  Oct. '06 change  (thousands)     change
Los Angeles       9,792     7,662 -21.8%     $492 $514     +4.5%
Orange            3,614     2,715 -24.9       606  625      +3.1
Riverside         5,542     4,200 -24.2       391  410      +4.9
San Bernardino    4,217     3,318 -21.3       354  362      +2.3
San Diego         4,155     3,282 -21.0       513  485      -5.5
Ventura           1,169       940 -19.6       596  582      -2.3
So. California   28,489    22,117 -22.4       473  484      +2.3

This fall-winter time period is going to be difficult to gauge since some seasonal features come into play. I've been furiously working on constructing a database of Redondo home sale listings that have not sold (class of 2006), to get a sense of how much pent-up selling demand there will be going into spring, when a potentially new crop of homesellers (class of 2007) want to add their homes to the pool.

Glossing over the period in the "early" 1990's when the housing market was in trouble is a major distortion of reality. To get a taste of what newspapers looked like at that time, see this February 10, 2006 post. In my opinion, this is yet another psychological signpost, when we are looking backwards through rose-colored glasses and haven't truly acknowledged the damage done to these markets so far. If you read between the words, stating that those who have owned their homes "for a while" will be fine glosses over the situation of those who have bought in the last two-three years. There really isn't much acknowledgement of their predicament at all!

I expect that when we start hearing and reading some grim talk about the markets that starts to acknowledge the pain that some home sellers are facing, we will be smack in the midst of a hard-down, and maybe with the end perhaps not far off. And when the mainstream housing market news starts sounding truly apocalyptic, that's probably a better time to buy - if you want to stay in an area and state that may have undergone some rapid socioeconomic upheaval. But that kind of change could be underway all over the country.

Californians were polled coming out of the recent election and they are flying high on optimism, voting in big spending bills to fix the potholes. "I feel much more hope now", "[California] is the place to be", and, from a homeowner whose home value has tripled since 1997: "I guess it's going pretty good. I love California", are examples that it just may not get much better than this, and it could go down from there.

I don't know if it'll happen that way or not, but that's the psychological model I am following until something better comes along.

Tuesday, November 14, 2006

L.A. Times: Southern California home prices hold as sales continue to slow

Annette Haddad has come through with this November 14, 2006 report The median price of a home in the six-county Southern California region in October was $484,000, same as September, and 2.3% higher YOY. Sales fell 22.4% to 22,117, the worst October in a decade, but the rate of decline was the slowest since July.

The article states something we know - that buyers are waiting. What I haven't heard before, though, is that sellers who want to move are now reluctant to list their homes, for fear of not getting their asking prices.

Well, that's a new one. "If I don't list it then I won't have to find out if the market is tanking." There's nothing like sticking your fingers in your ears to block out bad news, is there.

YOY % price changes are expected to turn negative by the end of this year or early next year.

In spite of the continuing downdraft in sales volume, most regions, even San Diego, managed somewhat of a rebound in its %YOY price change. I guess this is why Greenspan and Lereah have been talking about a bottom.

County         sales % chg    # sales     price % chg    median price
Los Angeles    -21.8%                     +4.5%          $514,000
Orange         -24.9%          2715       +3.1%          $625,000 
Riverside      -24.2%                     +4.9%          $410,000
San Bernadino  -21.3%                     +2.3%          $362,000
San Diego                                 +2%            $485,000
Ventura        -19.6%           940       -2.3%          $582,000

L.A.. Times: Home prices up 4.5% as sales fall in L.A. County last month

Here is the housing market bounce that Alan Greenspan and David Lereah were talking about. According to this November 14, 2006 L.A. Times story by Martin Zimmerman, the housing market showed "signs of life" in October. So what is all the excitement about?

September had 3% YOY price appreciation but October's YOY appreciation was 4.5% to a median price of $514,000. There was also a month to month gain, reversing the month to month August and September declines. The L.A. County median home prices peaked in July at $520,000.

For the state, October sales of all new and existing homes fell 21.8% YOY, but this was at a slower pace than September's 28% drop, so this is being trotted out as one piece of evidence that the market is "stabilizing." According to one analyst, buyers who thought they could get bigger price reductions are "throwing in the towel", and open houses have been "busy."

At least DataQuick's analyst is still suggesting that price appreciation could turn negative by the end of this year, stating that "It might be uncomfortable for those who bought at the peak if they have to sell, but for the vast majority of homeowners out there, it isn't going to mean much."

Here is a table of the breakdown in sales and prices:


                 Median Oct 05 (1000's)      Median Oct 06 (1000's)    % Chg
Resale houses    $520.0                      $540.0                    +3.8%
Resale condos    $405.0                      $410.0                    +1.2%
New homes        $450.0                      $507.5                    +12.8%
All combined     $492.0                      $514.0                    +4.5%


                 Oct 05       Oct 06      %Chg
Resale houses    6,998        5,489       -21.6%
Resale condos    1,774        1,336       -24.7%
New homes        1,020          837       -17.9%
All combined     9.792        7,662       -21.8%

So far, November beach city sales here in the South Bay have not suggested any kind of recovery. For today, November 14, nearly halfway through the month, I have TRIPLED what Melissa Data is showing in sales to date for each zip code to allow some leeway for numbers being published later this week. Then to continue the fantasy, let's just multiply that number by 2 to get a full November 06 estimate and compare it to column 4, which is the number of sales from November 2005.

           Nov triple        2x       Nov 05   %Chg
90245      12                24       19       +26.3%
90254      6                 12       33       -63.6%            
90266      15                30       51       -41.1%           
90277      24                48       57       -15.8%     
90278      24                48       79       -39.2%      

When I do all that, only El Segundo (90245) looks good, and so far this is a product of my fantasy, I have no hard evidence yet.

Does this look like a market bottom? Does this look like buyers are capitulating? So how many buyers showed up at your local open houses last weekend? I didn't see much traffic in my neighborhood!

My conclusion: These markets briefly stepped on the brake to enjoy the view while they continue their journey down the cliff. I know the Federal Reserve and Treasury are throwing everything they've got into our financial markets to cushion the slide in our national housing markets, but I doubt they'll be able to halt it.

Sunday, November 12, 2006

A quick visit to Centex Fusion at Hawthorne

On the spur of the moment we took a quick walk on Saturday afternoon up to the Fusion project. I commented to Bruce as we walked toward the entrance that the sign spinner seemed to lack the pizazz of the more creative ones I had photographed in Westwood. In the photo, with all the construction and traffic clutter, you can barely see her. She is left of center, and if you click to view the full photo, she is approximately an inch up and an inch left of the orange cone you see in the foreground, holding a red and yellow arrow pointing right.

Approaching by foot from the south

There were maybe six potential buyers hanging out in the sales office talking to salesmen. We went to see if there were models we could inconspicuously walk in and look at. There weren't, although one salesman did say that interested parties could be taken out to units under construction. Later we saw one salesman and a couple walking toward some of these units, all wearing hard hats.

Inside the community

I looked around in the sales office and found the infamous Centex coloring book*. I really wanted to get a copy of that coloring book to scan it and post it here, but that would have required that I talk to a salesman and ask for one, and I didn't really think it was fair to occupy a salesman's time when I wasn't there as a truly interested buyer. I was also disappointed that there was little in the way of useful literature available about HOA dues and other expenses.

Centex is having an Affordability Days promotion right now. This is an example of the mortgage terms they are offering - $3,120 a month on a high-end Fusion home. I am no financial wizard. It looks waaaaay too complicated for my taste, and I don't like prepayment penalties at all. Why all the complication? A fixed rate 150 year mortgage would be easier to understand than this gobbledygook! Show me a table of what my payment, principal, and interest are for the next umpteen years, that's what I want to see.

6 - 6.875% / 7.453% APR: Payment fixed for 5 years, based on a purchase price of $723,231 with ZERO DOWN PAYMENT, first five years monthly mortgage payment on the 1st TD fixed ($578,584), interest only at a rate of 3.875% and a note rate of 6.875% APR of 7.453%. The loan allows for buyer to defer 3% of the interest due each year for 5 years and apply it to the principal balance. Monthly payments of $3,120 fixed for the first 5 years – does not include taxes, insurance or HOA dues. After 5 years rate adjusted to fully indexed rate of a 2.25% margin over the monthly Libor Index, currently at 5.542% amortized over the remaining 25 years. Life cap of 11.875% and adjustment caps of 5/1/1. The 1st has a prepayment penalty for 3 yrs, a 1% origination fee. The 2nd TD($144,647) is at 10.375%, APR 10.872 fixed for 25 years, interest only payments for 10 yrs at 1% origination fee and one year prepayment penalty. To qualify for this program buyer must have a FICO score of 720+ on full income documentation.

Is this some kind of joke? Do people really finance their homes with terms like this? Why is this legal still?

When I studied the Centex complex, the units, and then the pictures I took, I decided it wasn't the colors that made the place seem drab to me, it was the architecture. The Centex complex strikes me as very "institutional" looking, with the units looking almost like the city tenements of 80-100 years ago.

Fusion at Hawthorne, south side

If that is true, Centex is not by any means the only builder guilty of building bleak-looking places. Here is a photo of a property on the corner of Manhattan Beach Blvd and Blossom Lane, which Bruce thought had a Fusionesque feel to it.

Fusion Forerunner in Redondo

I had noticed similar "institutional" design condos going up near Blossom and Ripley earlier this year. The condo being built in the photo below sort of reminded me of the jail that Clint Eastwood sprang Gian Maria Volante out of in that old spaghetti western. My own opinion is that this condo looks a bit brighter and perhaps more stylish (thanks to the stonework) than the condos in the previous photos, but institutional-looking nonetheless.

21st Century Nouveau Southwest Jail Cell?

* - The Centex coloring book is a coloring book for kiddies to get them pumped up about moving into a new house where they can color their new room! A gimmick to put yet more pressure on Mom and Dad to take the plunge.

Thursday, November 09, 2006

L.A. Times: ZipRealty cuts forecasts as earnings plunge 80%

I was a little distressed to see this November 9, 2006 story by Annette Haddad. ZipRealty is already in trouble financially, and this housing market has barely started correcting. I want to see ZipRealty survive. At least, I want to see the idea of ZipRealty survive and improved upon.

ZipRealty offers some "openness" to our local real estate markets that most other realtor websites do not. I have checked the MLS listings at the websites of a number of local realtors and although I have no way of quantifying my opinion, I think ZipRealty's listings are most complete. In addition, it integrates recent sales data of nearby properties, satellite maps of the area, and Zillow value estimates. OK, we know that Zillow has had complaints about the accuracy of its estimates, but the fact that ZipRealty is integrated with a data source is what I like about it. I like how the neighborhood financial demographic statistics are also available, though I do wonder about the accuracy - is the median mortgage debt really only $46,987? Again, I like the fact that ZipRealty is integrating information from another data source and making it publicly accessible. In addition, ZipRealty has RSS feeds, which means you can take easy-to-parse data and reformat it and display it the way you want on another web page. This is definitely a step in the right direction, though in their current state these feeds have some issues.

Having already spent some hours constructing a neighborhood sales table as well as a listings table in a database at home, I have seen many problems with the way real estate data is reported and have definite opinions about how to resolve that. In fact, I think the real estate industry will undergo a revolution born from a bear market, and that one positive consequence of the revolution will be "openness", but that's a topic way beyond this blog.

In the meantime, let's just hope that I will be able to continue to use ZipRealty as a data source, so that in a few months time I can start blogging the statistics I get from querying my tables. And if anybody knows a comparable website with all the bells and whistles, please post a comment!

Wednesday, November 08, 2006

L.A. Times: Home sellers saw big profits in October

You'll be hearing the housing bulls trumpeting this so it's best you are warned in advance. According to this November 8, 2006 L.A. Times story by Annette Haddad, southland home sellers saw huge gains in October, sparking hopes that the housing slump (and ensuing economic slump) won't be so bad.

Here is a table of the median profit earned, by county. Since most home sellers held their homes at least three years, the values of their homes in Los Angeles, Orange, and San Bernadino counties typically more than doubled. In San Diego and Riverside counties, the value gains were less than 100% - 91% in San Diego, and 80% in Riverside.

County          Profit
Los Angeles     $266,000
Orange          $331,000
Riverside       $178,000
San Bernadino   $203,500
San Diego       $243,000

What else does the article say? Oh, that some sellers had losses but since it was such a small percentage of sellers (less than 6.5%) it won't break the economy. They have been saying the same thing about mortgage default rates - "the numbers are small." Hmm, we're they talking about sellers losing money a year ago?

One thing this article does not discuss is what these home sellers did with their windfalls once they had monetized their gains. Did they leap back into the fray and put the cash back at risk? Plow it into the stock market, an equally risky casino? Flee California and plow the money into a different local housing market, thus contributing to its bubble? Did they have any home equity debt that had to be paid off, thus taking some of that wind out of the windfall? Who will be left sitting on the chair with a pile of cash when the music stops?

Monday, November 06, 2006

Revised numbers for October $$$ transaction volume

When I posted the October $$$ volume for selected zip codes, I did mention that I was publishing early and there was a chance that I would miss some October data. Tonight I updated my spreadsheets with the final October numbers.

I will not republish all the October charts as that will take too long, but the YOY chart for the beach cities combined is shown below. As you can see there was an extremely modest rebound as the pink line has started to crook up a bit.

Yet the headlines and ads have been trumpeting that the worst is behind us and the real estate slump is largely over. As I updated the spreadsheets I noticed that for many zip codes the number of sales for October increased but the average sale price actually fell, meaning that the total $$$ volume barely changed at all! Other areas, including both north and south Redondo, showed a little bit of a bounce. A few dip buyers have probably gotten lured in.

I am also republishing the rankings. You can compare them to the preliminary October figures and slso to the September figures to see if anything has changed significantly. I highly doubt it.

Real estate on steroids, realtors fat and happy:

90305 277.4% Inglewood
90301-90305 41.4% Inglewood/Lennox combined
90746 33.1% Carson
90304 25.6% Lennox
90245 24.3% El Segundo

Doing very well:

90043 19.8% Hyde Park, Windsor Hills
90037 15.6% South Central
90744 11.1% Wilmington
90062 10.7% South Central
90301 6.2% Inglewood
90303 6.1% Inglewood

Hanging in there:

90260 5.1% Lawndale
90047 5.0% South Central

Slip sliding away:

90302 -2.5% Inglewood
90044 -2.7% Athens
90745 -3.3% Carson
90250 -6.9% Hawthorne
90502 -7.1% Torrance
90018 -8.6% Jefferson Park

Losing a grip:

90501 -12.8% Torrance
90266 -14.2% Manhattan Beach
90504 -14.6% Torrance
90045 -16.7% Westchester
90016 -17.3% West Adams
90230 -18.1% Culver City
90094 -21.3% Playa Vista
90249 -21.5% Gardena
90501-90505 -21.9% Torrance Combined
90277 -24.6% Redondo Beach (south)

About to go over a cliff (realtors getting hungry):

beach cities -25.6% 4 Beach Cities combined
90066 -26.0% Mar Vista
90019 -28.8% Country Club Park/Mid City
90007 -29.0% South Central
90035 -29.2% West Fairfax
90036 -30.5% Park La Brea
90008 -30.6% Baldwin Hills / Leimart Park
90277-90278 -31.1% Redondo Beach combined
90503 -32.1% Torrance
90505 -32.8% Torrance
90232 -33.7% Culver City
90056 -33.8% Ladera Heights
90278 -35.4% Redondo Beach (north)
90717 -35.8% Lomita
90034 -36.9% Palms
90292 -39.4% Marina del Rey
90293 -40.8% Playa del Rey
90291 -40.8% Venice
90732 -41.4% San Pedro/Rancho PV
90254 -48.2% Hermosa Beach
90064 -48.4% Rancho Park/Cheviot Hills

Sliding down a cliff (realtors really hungry!)

90401-90405 -54.2% Santa Monica combined
90275 -63.5% Palos Verdes Estates

Sunday, November 05, 2006

Milestone: National Association of Realtors (NAR) officially gets out the defibrillator

I have to make this short tonight because I have a ton of work to do in my kitchen.

There are plenty of published stories about NAR running $40 million worth of full-page ads this weekend to jump-start the real estate market, and bubblewatcher Annette Haddad of the L.A. Times was among those mentioning that NAR has gotten out the defibrillator (OK, she didn't exactly put it that way - I did).

While we were grocery shopping Sunday morning I got the sudden urge to acquire the Sunday print edition of the L.A. Times so I could see the ad for myself. Bruce unfolded the huge thick paper in the car - this real estate insert was wedged in right after the front section - gee, is it always there?! They must want to sell houses reaal baaaaad!

In shrill 200 point font, the ad headline reads, "It's a great time to buy or sell a home." Then under "Consider these facts" it lists the following along with some accompanying text:

  1. Interest rate near record lows
  2. Large inventory won't last
  3. Prices overall have stabilized
  4. Positive outlook
  5. Real estate is a great investment

I don't want to sound too old, but I remember the monotonous drills I did discerning fact from opinion way back in grade school English classes. And I think I can say that in that list above, maybe #1 is closer to fact, but each of #2, #3, and #5 qualify more as opinion. #4 does not say anything at all. A grade-school child could probably read right through this ad!

Remember these ad phrases below because there is a good chance they will haunt a significant portion of the homeowning population over the next few years:

  • "...the outlook is for home prices to increase next year..."
  • "[Greenspan said that] most of the negatives are probably behind us. The fourth quarter should be reasonably good, certainly better than the third quarter."
  • "Homeownership is a safe, secure way to build long-term wealth."
  • "We have had a record inventory of homes on the market in recent months, offering consumers the greatest choice in decades. Don't delay. Now is a great time to buy or sell a home.

The second interesting thing about this real estate insert is the article by Diane Wedner called "Meet the flockers", accompanied by a cartoon picture of a herd of sheep. The article describes herd psychology in the housing market. There is something about the tone of the article that gripes me - while herd psychology is being acknowledged, one person quoted in the article almost blames people for causing recessions by "following their neighbors" and "ignoring solid economic fundamentals." Well what does that mean?!? What is so "solid" about following a CPI measure that has no basis in reality, a jobs report that creates thousands of phantom jobs out of thin air each month, manufacturing surveys that are cratering in, Enron-style accounting in the government's books, and a yield curve that has been inverted or nearly inverted for the better part of a year?? The economic fundamentals are looking stinkier by the day and maybe the neighbors are being smart and paying attention!!!

The third interesting thing about this real estate insert is an easy-to-miss article buried back in page 11, called "His Little house in the woods proves less can be plenty." This article features a clever architect who specializes in building homes from 50 square feet (that's right, 2 digits), up to about 700 square feet. This points out one way in which our bloated, wasteful, and consumption-oriented overbuilding of dot condos and bubbleminiums could resolve itself in the coming few decades. In my opinion, it shows a deflationary mindset wiggling its way into the unconsciousness of the herd. "Well gee, why do I want this big oversized house, just to pay big heating bills, and lighting bills, and property tax bills, and homeowner insurance bills, when I can have a much smaller place without nearly the expense??" When deflation sets in, spending contracts. And yet another illustration of how what we perceive as valuable can change very quickly.

By the way, Redondo Beach inventory appears to have jumped up to a new high. It was wavering back and forth for a while at the end of October but finally made an upward leap in November. For a while I thought there might be a window of opportunity for a few sellers to escape the bubble with late 2004 - early 2005 asking prices, but now I'm not so sure.

On a final note, I thought I'd quote some passages about the 1929 stock market crash here:

[After Black Thursday (October 24, 1929)] stocks, it was agreed, were again cheap and accordingly there would be a heavy rush to buy. Numerous stories from the brokerage houses, some of them possibly inspired, told of a fabulous volume of buying orders which was piling up in anticipation of the opening of the market. In a concerted advertising campaign in Monday's papers, stock market firms urged the wisdom of picking up these bargains promptly. "We believe," said one house, "that the investor who purchases securities at this time with the discrimination that is always a condition of prudent investing, may do so with utmost confidence." On Monday the real disaster began.

Quoted from The Great Crash 1929, by John Kenneth Galbraith

As some bearish friends of mine say, "There is nothing new under the sun. The more things change, the more they stay the same."

Friday, November 03, 2006

Manhattan Beach Reporter: No need for public web site

There is an article in the November 2, 2006 print edition of the Manhattan Beach Reporter reprinted out of Realtor Magazine, in which realtors in Cinncinnati voted to remove public access from MLS listings from realty websites. An Ohio appellate court did not disagree with the realtors' decision.

Gee, do you think this is a way of censoring bad news? Could the Ohio market be so bad that realtors want to "protect" the public from it?

This kind of precedent scares me. One day we could point our browsers to our local realtors' websites only to find that public access to their listings was no longer a possibility.

I did point my browser to the Cinncinnati realtor website, and it turns out that they post links to other websites that do allow searches. So maybe I'm annoyed over nothing. Still, the mere possibility of shutting off public access to real estate listing data bothers me. If the news were to get really bad, I wouldn't be surprised if we do see attempts at censorship. It would be dumb to do this, because houses are the product they sell. But stupidity can overrule reason if we end up in the midst of a bad economic downturn.

Thursday, November 02, 2006

Got a question or general comment? Post it here!

If you want to leave me a message, feel free to post it here. I'm leaving a permanent link to this post in the sidebar so you can always find it.

I am sooooo glad that so many of you find this blog interesting and useful, and thanks to you I am truly inspired and fired up to add more regional housing data analysis to this blog. But I'm sorry I just don't have time to respond to all the emails. I get up at 4 AM to leave at 5:15 AM for my bus to UCLA, and I work until about 2:30 PM, then come back home on the bus and I do stuff at night and I am chronically sleep-deprived. Sometimes I think I'm sleepwalking when I manage to get done what I do get done.

So pleeeze, I've just gotta ask that you register yourself with Google if you haven't already, so you can leave a comment here or on any other post that gets your interest. That way if you've got a question that I haven't gotten around yet to answering, maybe another South Bay Beaches Bubble blog visitor can help you.