Tuesday, January 30, 2007

L.A. Times Opinion: Bring on the Housing Slump

Opinion writer Joel Kotkin in this January 28th piece has stated some of the impossible-to-ignore problems about the Los Angeles housing market that have been mentioned here over the past year.

Kotkin correctly mentions how real estate developers, speculators, and homeowners have "gorged" on the big runup in property prices over the last five years and how middle-class families are moving out, though he has completely neglected to mention how local politicians have aided and abetted the orgy, always taking advantage of opportunities to collect more and more property taxes. There have been many land-grab cases here in the Los Angeles area too, for "economic development." Politicians have been putting the goose that laid the golden egg on growth hormones and have jeopardized the health of the goose.

I do not necessarily subscribe to Kotkin's "gradual deflation" theory. If and when critical points of stress are reached, I still believe an economy, or market, can unravel rather quickly after it has been bumbling along for a while. After all, a market can bumble along in the other direction, and then hyper-boom very quickly, as we have witnessed. At this stage, few writers still want to voice the possibility that pain in the other direction can be brutal, sudden, sharp, and severe.

Kotkin sees a building trend shifting back to the middle-income buyer. That can be good or bad. He sees the McMansionation trend fading out. But Kotkin also says a builder who offers a "good product" at "$400,000" "will sell it." To some extent that is true. But excuse me, $400,000 still is very budget-stretching. That's still not affordable to many. It might as well be $1,000,000. And what will the product be? High density tenement style housing in a city masquerading as a beach city built by a company who doesn't even bother to mention the city's name in one of its brochures?

Kotkin says a "severe price correction" would be helpful in reviving L.A.'s inner city, but at the top of the article he says the real estate bubble will deflate gradually than burst. I'd like to know what criterion he uses to rate a gradual deflation rather than a bust. Will it be some measure of median price change per year? It is my own belief that the psychological devastation will accumulate regardless of what he calls it, and when it hits a certain point, it will feel to market participants like a severe blow regardless of whether prices initially declined by 0.2% a year or by 20% a year. Whether you die from gunshot wounds or from a million paper cuts, you're still dead.

Kotkin shrugs off the ramifications of a decline, saying "who cares, besides BMW dealers and McMansion builders?" Oh, how about the lady who got laid off from the fire alarm company she worked for because her company was having trouble with receivables from local builders. Or, how about the local restaurant who rents out its big dining room for wedding receptions, only that business has fizzled because people are no longer taking out big home equity loans to splurge for fancy weddings for their daughters? Or how about furniture companies? Or automotive companies that sell trucks to contractors? I am not making these examples up, these are situations that have all appeared in credible print within the past year. It's not just higher-end wage earners who may have been living vastly beyond their means, it's a lot of people at lower economic tiers too. I think Kotkin underestimates the economic ripple effect of a potential bust.

By the way, I think we are entering a dangerous turn in the local market here. Because we have seen such high asking prices within the past few years, we have those levels set as "anchor points" in our brains. In the properties I'm watching in Redondo Beach, there are plenty of substantial price reductions, so these properties now seem like "great deals." It is my own opinion that they are not great deals - not when you consider the overall price history of the area. There is plenty of buy-the-dip activity going on - the market is not dead. The Sirens are luring Ulysses into the housing market. But the inventory buildup has not gone away.

Dollar volume charts will probably get published next weekend.

Wednesday, January 24, 2007

L.A. Times: More Californians at risk of losing homes - "People are living on the edge ...they have good jobs but they bought over their heads.."

The quarterly numbers for mortgage default notices are out in this January 24 report by David Streitfeld. We'll compare this report to the October report and see what the numbers are and what people are saying.

For Q4 2006, the number of mortgage default notices issued to Californians was the highest since 1998, rising to 37,273. (The accompanying graph in the story says "Southern California", but I think the number applies to the entire state.) That is up 145% from Q4 2005. The number of foreclosures was 6,078 for Q4 2006, up from 874 in Q4 2005. That's an increase of 595%, nearly 7X.

Yet, the attitude of mortgage lenders and analysts the article surveys is "So far, this isn't alarming", "I don't really see any stress out there. Most people... are figuring out ways to get those mortgages current by any means possible so they're not kicked out on the street."

I don't think they get it. I guess they just don't want to yell "Fire!" in the crowded theatre yet. While I would agree that the pure raw numbers by themselves may not necessarily be indicative of anything, the rate at which they have been changing has definitely been making me take notice!

Unfortunately, this article comes up short. It does not break down the default rates by county, as was done for last quarter. If the L.A. Times subsequently publishes this breakdown, I will blog it.

The article brims with all kinds of rationalizations for the numbers though. At least for this quarter they now admit that the option of escaping foreclosure by selling into a booming market "isn't available to recent buyers or those who have visited the pig (piggy bank) once too often." Also, the economy was very bad here in California for a period of time during the 90's. And yet my interpretation of all this is, isn't it amazing how rapidly these numbers are worsening while the economy is still holding up!?!?!

It's hard to believe that in the mid-1990's, the quarterly defaults routinely exceeded 50,000 and foreclosures topped 15,000. I think we're easily going to blast through those levels and very soon. But the article makes a good point here. Again, the raw numbers are not indicative of anything unless you have something to compare them against. We have a substantially higher supply of housing stock and more homeowners. If we compared the number of homeowners getting default notices compared to the total number of homeowners in the state we'd have a somewhat better idea of how much trouble we are in at this stage. Nevertheless, I find the rates of change alarming, and I am amazed by the seemingly blase attitude toward these changes.

Don't believe for a minute that the mortgage lender fairy is bailing out everybody in trouble. The article talks about a man who was faced with a 50-50 chance of dying on the operating table because of his heart problems. So he refinanced the house to make sure his wife had a cash cushion, failing to read the part about how the payments would skyrocket. And there was another problem. He lived. The equity went toward paying his medical expenses and bills. And then his property value started droppping. As he puts it, "If I hadn't survived, everything would have been fine."

The mortgage broker trying to help this man out of his mess admits, "People are living on the edge, and they can't help it with the price of houses. They have good jobs but they bought over their heads, into the American dream." The Center for Responsible Lending notes that those who bought most recently are most at risk with their subprime loans. The center estimates that 25% of the subprime loans made in Merced will result in foreclosure. Vallejo, Bakersfield, Fresno and Stockton are also high risk, along with several other unnamed California cities. The Center estimates a loan failure rate of 21.4% for 2006 subprime loans in the state, with Nevada and Washington D.C., expected to have worse rates. They will probably get the trend right in their forecast - let's see how the actual numbers fare later.

But back to the blase attitudes of the experts. The jump in foreclosures "won't crash the housing market. As long as no life event comes along that pushes them over the edge, they'll probably be OK. With 85% of Americans dying either of cancer or cardio-vascular diseases thanks to their under-exercised junk food fast food lifestyles, I'm not particularly optimistic that the bulk of leveraged homeowners in poor health will escape such financial catastrophes.

Sunday, January 21, 2007

L.A. Times: Remember 'normal'? Housing market shows signs of stabilizing, forecasters say

If you've been reading my blog long enough, you know what I think of forecasters, and you are aware of the tremendous amount of bandwidth I've wasted disparaging them. Diane Wedner in this January 21 story reports on what forecasters are saying lies ahead for 2007. I plan to continue monitoring what the forecasters say, *NOT* because I think they spew gems of wisdom from their lips, but because I think they are representative of the frame of mind of the real estate transacting populace.

So what do the experts say? Big hikes in mortgage rates are "not expected." They admit that there is a glut of resale homes, because they feel that "barring a bigger glut", we'll see maybe as long as three quarters of ugliness, then things will "pick up" again before the end of 2007.

The market is returning to "normal." Sales and prices are returning to the "middle of the grid." (I wish they'd show us this grid!) "Normal" in their dictionary means a return to single-digit appreciation, then a dip, then leveling off. This is just another way of saying (excuse me, I feel nauseated...) "soft landing."

DataQuick thinks prices will hold the current level of growth, which was recorded as 5.7% at the end of last year. Michael Carney at Cal Poly Pomona isn't quite as Pollyannish optimistic as most of the crowd. He actually sees - be sure you're sitting down and holding your chair firmly - he actually sees prices falling about 5% from last year, with buyers continuing to wait on the sidelines.

And how about sales? Leslie Appleton-Young of CAR predicts a 7% drop in sales, compared to the 23% drop in sales in 2006. (I am not sure she is talking strictly southland here or the entire state.) She claims "we're close" to absorbing some of the home sales left over from 2006, and that "the worst is over." Sound familiar?

OK, the experts are leaving themselves wiggle room here, saying inventory is the "wild card." They note that many homesellers have decided not to compete with builders, choosing to wait to list their homes. So how much will inventory go up this spring? Dolores Conway at the Casden Real Estate Economics Forecast at USC states that we will see a surge in inventory "only if something bad happens in the job market." Really?

The experts expect home purchase loans to remain relatively down while refinancings will trend up, with borrowers converting to fixed rate mortgages. The loans that will be the rage this year are hybrid five year loans, with a fixed rate the first five years and an adjustable rate thereafter. The experts claim that "a lot depends on what the Fed does."

Where should people be buying? Jack Kyser, an economist in Los Angeles, points out La Mirada, Whittier, and Downey as nice boring places that aren't trendy (and don't have the prices of the trendier areas), have good schools and a good public safety record. San Dimas is cited for quality of life. What does he say about the South Bay and westside? "Still hot, but pricey." Still hot, really? And where should first time buyers go? "South L.A."

And what's in store for homebuilders? Well, builders will see a return to a better market by the end of Q1. So you better get your great deal now now now! Permits issued for last year fell in the 155,000-170,000 range, and at the peak, in 2004, 212,960 permits were issued. So the permit range we're seeing now is "solid." Construction will be slow in Q1 as builders sell off last year's inventory. But things are looking much rosier for the second half of 2007. "Builders aren't focused on affordable, entry-level homes, which are less profitable for them."

Where does one begin with the problems in this piece? It's more of the same talk as last year, dismissing any glitches now as "temporary", with a resolute determination that things absolutely will pick up by the end of this year. How can they be so sure???

The experts call this a market returning to "normal", but what is so normal about a market at near-historically low affordability?

Let's keep in mind that Leslie Appleton-Young wasn't saying anything about a 23% drop in sales in January 2006, and not even in May or June of 2006. So why should we believe her now? She's obviously been reading from the David Lereah script.

If inventory levels depend *only* on the job market, then how does USC explain the big surge in inventory in 2006 while the job market was still so good? When they call inventory a wild card they almost trivialize it. Inventory is not just a back seat passenger along for the ride, it will be one of the key drivers of this market, depending to substantial degree on the financial solvency of homeowners.

More crappy lending, pushing the pain out into the future as far as possible. The solution for a hangover is more alcohol, yep.

Yes, let's buy in South Los Angeles, and let's keep bubblifying those areas too. Let's not leave any area out!

While you're at it, builders, start digging your financial graves. Had you thought about building something affordable for entry level buyers, reducing your profit somewhat, you might be able to say later that you still have a profit. But if you continue to insist on building what you are building...

A sampling of Redondo listings

I thought I'd scrape through my records and see if I could come up with anything interesting. As you know, I scramble real addresses to protect the guilty parties. I list previous sales dates and prices for a property along with the current asking price of that property.

Here are some potential short sales brewing:

5162 Dnalhur #13

10/15/2005  $559,000
now asking: $529,000


0301 Euneva A

12/13/2005: $870,000
now asking: $919,000


0122 Swehtam #B

12/14/2004:  $679,000
now asking:  $729,500, down from $775,000

"Great opportunity, built in 2004 by richvr and it is been vacant since. Excellent
move in condition. Plantation shutters, travertine floor, marble, granite counter 
top, ss appliances including refrigerator, washer & dryer.Cherry wood cabinets, 
natural stone tile, fireplace, vaulted ceiling and a lot more. This unit is priced to 
sell. Must see to appreciate. Thank you."

That last one was originally listed at $749,000 in the spring of 2004. I still have that 2004 flyer. They had to knock it down to $679,000 to sell it later that year. Of course, being the busybody that I am, I am wondering, why didn't the December 2004 buyer ever move in?

Moving on, now here's an honest-to-God remodel/flip. Looks like they put a lot of work (and probably money) into it. Will they get a nice profit for their efforts?

044 N. Tcepsorp

5/17/2006:  $775,000
now asking: $949,900, down from $1,175,000

If they sell now at their price, that's a 22% gain, nearly $175,000. If the selling transaction miraculously skims off only, say, $40,000 for the realtors, closing costs, etc, that would leave a $135,000 gain.

The property description states:

"Completely rebuilt and remodeled. All new electrical and plumbing. Beautiful 
hardwood flooring. Beautiful custom kitchen with granite countertops and new 
cabinets, with kitchen aid stainless steele applicances. All new windows and doors. 
Custom finished bathrooms with new fixtures,travertine and stone finishings. Large 
master bed with large walk in closet, custom bathroom with jacuzzi tub/steam shower, 
and his and her sinks."

The number of bedrooms was reduced from 5 to 4, so there must have been some serious wall-knocking going on. I have no idea how much it cost to do all this, but if they sank, say, $75,000 into it, that would leave them a profit of $60,000. Not bad, IF they can sell it at the current asking price. But will there be income tax on the gain? Maybe a blog reader knows. If you live in a house while you remodel/flip it, can you avoid tax on the gain?

And here are some plain old boring properties with some price histories.

6171 Namdoog

2/6/1998:   $320,000
4/27/2000:  $397,000
10/9/2003:  $625,000

now asking: $809,000, down from $849,900

If they sell now for the current asking price, that's a 29% gain from the 2003 sale price, in 3 1/4 years. More than 2X the 2000 sale price, in 6 3/4 years. More than 2.5X the 1998 sale price in less than nine years. This is not a property that has enjoyed the most insane of appreciation rates in Redondo Beach. I think some properties have managed to eek out a double since 2002-2003. But this one still has appreciated quite well.

9022 Ruofud #B

8/8/1986:   $207,502
now asking: $679,000, down from $715,000

#A unit sold for $350,000 in late 1993

What the price record does not show directly is the cataclysmic plunge in the market during the late '80s - mid '90s. If the property is sold now for the current asking price, that is *ONLY* a 3.3X gain since 1986. There is a good possibility that the owner paid too much for it back in 1986, but we've seen how easy credit expansion and a mania can smother over such errors. We know that appreciation rates have been wacko for the last several years, so why such a small gain relative to the other wacko gains we've seen in this neighborhood? The answer is probably because prices fell into a chasm and took a number of years to crawl out. This homeowner was able to stick out the dark years. Fortunately, the neighborhood did not fall apart in that time. Will homesellers as a group be able to clench their teeth and stick it out as we hit the same kind of turbulence down the road? I don't think it's as likely. I expect exponentially greater financial frailty making itself more and more painfully obvious as we move forward, and I expect some socio-economic upheaval in the years ahead.

4062 Setag #2

11/7/1997:  $131,000
2/9/2003:   $285,000

now asking: $484,000

That's a 70% gain in 4 years, if the current owners get that asking price.

I should point out here the 1997 buyer's timing was pretty good, coming off the low in 1995-1996. Too bad he didn't hang on to it. Yes, timing matters, probably above everything. When the gun goes off, all the turkeys fly, and in a market boom, almost any property will sell. Had the 1997 seller hung on to it, he would be dealing with a sale bringing in 3.6X his original purchase price, approaching a quadruple in less than 10 years.

Saturday, January 20, 2007

L.A. Times: Upward rent spiral may be slowing down

If you've been equally as frustrated by surging rental costs as much by housing costs, take heart. We know the Los Angeles bubble is unwinding in many areas, and now it looks like rents are starting to weaken too. I've been holding the opinion that a rental surge here can not last for very long, because one of the things that frustrated homesellers who can't unload their houses do is - try renting them out. This is increasing the supply of available rentals, which will put downward pressure on rents. Homesellers who were asking for unrealistic selling prices are now applying the same philosophy in what they are asking for rent. It won't work, and those looking to rent will probably look elsewhere. I posted about this on December 26. On July 21 we noted an L.A. Times story that discussed the surge in rental prices here in the West.

Now L.A. Times bubblewatcher Annette Haddad in this January 18 story notes that the increase in rents is slowing substantially. Taking their cues from builders, landlords are offering incentives - to move in. According to the story, there is a boom in apartment construction, though I can tell you anecdotally that I haven't been noticing any affordable apartment construction here in the South Bay or westside - some luxury apartment construction, but nothing what I would consider reasonable and affordable, like what I live in now. If anybody reading this knows about the construction of affordable apartment housing in this area, please let me know! I really doubt anything is being constructed though, because the economics for affordability just aren't in place.

The average rent in the six-county southern California region rose 6.4% to $1,422 YOY, while the occupancy rate fell by 0.6% to 94.3%. Indeed, some households are doubling up, a strategy which was practiced in the 1930's, exacerbating real estate markets in that era. The Riverside-San Bernadino county region saw occupancy drop 3.7% between the Q3 and Q4 2006, which was the biggest quarter-to-quarter drop of the 28 markets surveyed by RealFacts.

The Inland Empire area had 4,200 new apartments come on line in 2006, and softening rental prices are a given. Here in the Los Angeles-Orange county area, rents are still increasing, with the average rent increasing 7.4% in Q4 2006. But occupancy is falling also, down 0.8% in Q4 to 95.2%. About 2,100 new apartments came on line.

The article describes the experience of a landlord with six vacant condos in Riverside, unable to rent them out at $1200, and still unable to rent them out at $895 to $950. Does this sound familiar?

The southern California housing market is undergoing chaos. And to think we haven't seen The Major Decline yet - this is just the opening act! If people are not buying homes at the pace they once did, and they are refusing to rent at current prices, then they may well be seeking greener pastures elsewhere.

Other measures of Beach Cities market activity, December 2006

Shorewood has come out with its December numbers.

Average DOM (days on market) for sales for all the beach cities was 56 days. In a prior posting, I actually came up with a guesstimate of average DOM for Redondo Beach as 90 days, and I stated in that post why I actually thought I was understating DOM. My calculation of DOM is also quite different.

The interesting thing about the DOM graph is the swings. Notice the peak in January-February 2005, and how the trend drifts back down, then swings back up again to peak in January-February 2006, then drifts back up again, then notice how it's been climbing higher during the second half of 2006 (with some very recent flattening).

Next we have my own invented measure, I-S/S, also known in politically correct terms as "supply strength" (realtors are telling us there are now more homes to choose from, which is good) but which can also be interpreted as "demand weakness." The interesting thing this month is that the number of sales in the beach cities was 118, exceeding those in December 2005 by just one, but because inventory is up 72%, the ratio now charts much higher.

If you are new to this blog, pay attention to that bottom in May 2005 labelled 0.8 from the moving average. I interpret I-S/S = 0 to mean that supply and demand are perfectly balanced. Look at how this ratio has been climbing since! I think I-S/S has been a leading indicator of real estate activity here.

Finally, we have median price data from Shorewood. For December 2006, the median sale price for the beach cities was $802,000. The price is still trending down.

Beach cities are El Segundo, Hermosa Beach, Manhattan Beach, and Redondo Beach.

South Bay Resale Activity for December 2006

I don't know how much longer I'll be able to squeak this resale activity data through on this blog, but here goes!

According to the DQNews listings in the L.A. Times, the December 2006 monthly resale activity for the south bay area consisted of the following:

Zip       # SFR   Median   %Chg   # Condo  Median    %Chg 
          Sales   $SFR      YOY    Sales   $Condo     YOY
90045      31     739,000  -3.7      4     427,000   -0.7
90245       3     660,000 -25.8      4     653,000   -7.5
90250      36     517,000  -2.0      5     445,000   18.4
90254       8   1,350,000  -0.5      6     882,000  -13.3  
90260      10     535,000  -0.1      6     436,000    3.0
90266      28   1,389,000  -0.8    n/a         n/a    n/a
90277      11     929,000  -8.1     19     775,000   -0.3 
90278      25     719,000  -2.7     18     618,000  -14.4

County  5,405     550,000   5.8  1,254     412,000    3.0

Los Angeles County and the beach city zip codes - El Segundo, 90245; Hermosa Beach, 90254; Manhattan Beach, 90266; Redondo Beach, 90277, 90278 - are charted here. DQNews recorded condo sales for Manhattan Beach as N/A. That was the first time I had ever seen that for a beach city! I don't know if that means there were 0 sales, or if they didn't know what the sales were. Either way, that makes it difficult to show a continuous graph for median price, so I just said OK, let's suppose the median price is the same as it was for December 2005, so I can plot this thing.

For those of you unfamiliar with my postings, keep in mind this data does not include new home sales. Also, pay attention to the simple 3 month moving averages I plot along with the raw data. You'll go cross-eyed looking at all the herky-jerky motion of the raw figures, and the moving average lines will not only be easier on your eyes but give you a better sense of any ongoing trend.

Thursday, January 18, 2007

What lies beneath

"Never let'em see you're desperate." I think that was the rule in a home sale transaction. Well, that rule is rapidly getting overturned. Increasingly, listings contain words of desperation. It may become downright trendy to let your financial problems all hang out in your home listing, sort of like being on Jerry Springer or whatever TV show they go on these days to confess their sins. Not all listings show that desperation, but some are so odd as to make me wonder what lies beneath that murky listing. What turmoil rages in our markets? Will these descriptions from Zip Realty and Craigslist provide us clues?

-- Spectacular view of the city. This condo is in mint condition. Shows extremely well. Large bedrooms large closets with mirrored doors. This is a good opportunity. The seller is in financial trouble and must sell. The sale is subject to a short sale. Buyer needs to understand. The property is going to be vacant and ready for occupancy.

-- Great opportunity, built in 2004 by richvr and it is been vacant since. Excellent move in condition. Plantation shutters, travertine floor, marble, granite counter top, ss appliances including refrigerator, washer & dryer.Cherry wood cabinets, natural stone tile, fireplace, vaulted ceiling and a lot more. This unit is priced to sell. Must see to appreciate. Thank you

-- This house is going for a bargain. It is the lowest priced 2 on a lot over 2000 sqft in north redondo beach. The layout is traditional with a formal living and dining room. It features a kitchen with ample counterspace, fireplace, and rooms with high ceilings. The house has 2 patios. The larger one off the master bedroom. It is a well maintained home.

-- I need a real esate agent to help me sell my place asap because i need to move and cant afford payment anymore. Please reply with your background (why you will do a good job), how busy you are (i need someone who is devoted to getting my place sold asap), and your experience with talking to banks as this may need to be a short sale, and your phone #.

-- Built only last year, this seller is ready to make a deal. Highly motivated to close quickly and give himself and his buyer a wonderful gift.

-- We are constantly meeting with home sellers in the South Bay who need to move quickly and sell their home ASAP. This means that we can match you (the buyer) sometimes before the property is even listed on the market!! Email me the details on the home characteristics you are looking for...and let me and my team be your eyes & ears!

Tuesday, January 16, 2007

L.A. Times: Sales down, prices up for 2006 housing market

Annette Haddad is busy today. In this January 16 story, she notes that the six county Southern California region also ended the year very bubble-defiant. The median price for a home in this area hit a new high in December 2006 at $495,000, up 3.3% YOY and up 1.6% from November.

In spite of the new price highs, though, sales suffered a 22.3% drop YOY, down to 22,485 new and resale homes. This volume was up 10.3% from November, apparently as December is considered to be a key month of real estate activity, as buyers and sellers scramble to wrap things up for the tax year.

All Homes      No Sold  No Sold  %Chg   Median Median  %Chg
               Dec-05   Dec-06   YOY    Dec-05 Dec-06   YOY           
Los Angeles     8,845   7,703  -12.9%  $490K  $522K  6.5%
Orange County   3,826   2,719  -28.9%  $621K  $642K  3.4%
San Diego       4,262   3,613  -15.2%  $516K  $483K  -6.4%
Riverside       6,305   4,318  -31.5%  $411K  $432K  5.1%
San Bernardino  4,580   3,154  -31.1%  $361K  $372K  3.0%
Ventura         1,134     978   -13.8%  $630K  $593K  -5.9%
So. California 28,952  22,485   -22.3%  $479K  $495K  3.3%

I don't agree with the analysts who say that "most of the increase" we have seen in the last four years "is here to stay." Though some are leaving open the question "how much" will prices fall?

L.A. Times: Home prices climb in county

It doesn't look like we are following the early '90's bubble bust timeline - this bubble is marching to its own drumbeat. A good bubble like this one is darned difficult to burst. According to this January 16, 2007 story by Annette Haddad, the median L.A. county home price rose 6.5% in December.

And buyers are complaining. There were too many buyers out there at the end of 2006, anxious to wrap up deals before the end of the year. Sellers are still refusing offers below asking prices.

And this is in spite of a drop in L.A. county sales of 12.9%, YOY. In spite of average DOM rising 5% to 104 days. Apparently the number of homes on the market declined 14% to 32,363. But the way I read that, I think it just means that many homesellers just gave up trying to sell in 2006 and just let their listings expire. The big question is, will they be back this year, trying to sell again?

The median price was $522,000 for December, the highest since $520,000 set in July. L.A. county's median was up 8.5% in 2006. But sales for 2006 fell 16.8%, which almost looks good when you start looking at some other parts of the state! Home price appreciation in our county actually peaked in 2003, at a rate of 24%.

Catalist Homes notes that there is a rise in pending home sales that depends on the selling of an existing home. How many of those deals will fall through because first-time buyers are unwilling to pole-vault the affordability hurdles?

Here are the specifics for Los Angeles County:

Sale prices          Year-over-year
(In thousands)  Dec. '05   Nov. '06   Dec. '06    Chng.
Resale houses   $520       $540       $550        +5.8%
Resale condos   $400       $410       $412        +3.0
New homes       $445       $483       $511        +14.8
All combined    $490       $510       $522        +6.5
Number of sales   
Resale houses   6,276      5,167      5,405       –13.9
Resale condos   1,542      1,277      1,254       –18.7
New homes       1,027        907      1,044        +1.7
All combined    8,845      7,351      7,703       –12.9

I'm sure there are some homesellers in my neighborhood who would love to see some of these frustrated buyers show here!

Sunday, January 14, 2007

Redondo Beach stats for the most recent 150 listings/reductions

I thought I would try a more extensive analysis on a larger dataset of Redondo Beach listings to determine what the selling price expectations are of the owners of those listings. In my previous post, there were about 37 data points (new listings from New Year), with a median asking price of $872,000. In the little data we have of December sales, we came up with a median sale price of $704,500. That gap between the previous month's median sale price and the median asking price of this month's 1750-2new listings is substantial.

With a bigger dataset going back further, I would expect the median asking price to get pulled down a bit. This is in fact what happens on my dataset of 150 recent listings, new and reduced, starting from late November. But the expectations are still very high.

STREET               LIST/REDUCE     PRICE       SQFT
Carnegie              1/13/2007      619000      1732
Steinhart             1/12/2007     1275000      2909
The Village           1/12/2007      464000       619
Lucia                 1/12/2007     1995000      4300
Carnegie              1/12/2007      625000      1564
Paseo de la Playa     1/12/2007     1150000      1578
Esplanade             1/12/2007      679000      1187
Pearl                 1/11/2007      850000      1110
Ruhland               1/10/2007     1079000      2320
Prospect              1/10/2007      388000       750
Pacific Coast         1/10/2007      925000      1812
Calle Mayor           1/10/2007      859000      1566
Belmont               1/10/2007     1049000      2580
Nelson                1/10/2007      775000      2414
Calle Mayor           1/10/2007     1169000      2527
Guadalupe             1/9/2007       879000      2336
Paseo de las Delicias 1/9/2007      1100000      1636
Grant                 1/9/2007       875000      3000
Perkins               1/9/2007       650000      1645
Morgan                1/9/2007       769000      1939
Paseo de Gracia       1/9/2007      1299000      2288
Esplanade             1/9/2007      2690000      3385
Broadway              1/8/2007      1279000      3050
Blossom               1/8/2007      1219000      2580
Garnet                1/8/2007      1375000      2595
Pullman               1/8/2007       919000      2857
Curtis                1/8/2007       749000      2534
Juanita               1/7/2007      1399000      3166
Calle Mayor           1/7/2007      1895000      2028
Belmont               1/7/2007       598000      1704
Juanita               1/6/2007      1369000      2911
Via Monte DOro        1/6/2007      1349000      2036
Guadalupe             1/6/2007       729000      1819
Vanderbilt            1/5/2007       529900      1070
Grant                 1/5/2007       769000      1912
Grant                 1/5/2007       799000      1912
Grant                 1/5/2007       769000      1912
Calle Mayor           1/5/2007       709000      1403
Grant                 1/4/2007       829000      1948
Grant                 1/4/2007       839000      1915
Felton                1/4/2007       689900      1400
Paseo de la Playa     1/3/2007      1395000      2412
Ralston               1/3/2007       869000      1700
Juanita               1/3/2007       939000      2114
Guadalupe             1/3/2007      1650000      2850
Gates                 1/3/2007       924900      2250
Pacific Coast         1/3/2007       730000      1380
Ernest                1/3/2007       859000      2276
The Village           1/3/2007       379000       410
Vanderbilt            1/2/2007       769000      1912
Catalina              1/2/2007       465000       712
Graham                1/2/2007       718122      1510
Helberta              1/2/2007       975000      2365
Irena                 1/2/2007       919000      1984
Belmont               1/2/2007       799900      2466
Armour                1/2/2007       874900      2063
Vista Del Parque      1/2/2007      1199000      2492
McBain                1/1/2007       689000      1057
Juanita               12/31/2006    1099000      2046
Via La Circula        12/29/2006    1349000      3048
Juanita               12/28/2006    1039000      2450
Speyer                12/28/2006     864000      1568
Helberta              12/21/2006    1299000      3135
Esplanade             12/21/2006    3200000      3740
Esplanade             12/21/2006    3100000      2497
Anita                 12/21/2006     954500      2392
Flagler               12/20/2006     765000      2272
Armour                12/19/2006     699000      1389
The Village           12/19/2006     899000      1434
Curtis                12/18/2006     715000       784
Nelson                12/18/2006     820000      2200
Broadway              12/18/2006    1189000      2407
Via La Soledad        12/16/2006    1100000      1394
Camino Real           12/16/2006     477000       901
Esplanade             12/15/2006     895000       997
The Village           12/14/2006     435000       619
184th                 12/14/2006     565000      1034
Gates                 12/13/2006     420000      1065
Robinson              12/13/2006     849000      1269
Emerald               12/13/2006     639000       550
Helberta              12/13/2006    1049000      1296
Clark                 12/12/2006     819000      2947
Calle de Aragon       12/12/2006    1379000      2423
Juanita               12/12/2006     999500      2300
Francisca             12/12/2006     869000      1710
Lucia                 12/12/2006     979000      2161
Havemeyer             12/11/2006     749000      1114
Graham                12/11/2006     729000       800
Reynolds              12/11/2006     799000      1816
Vanderbilt            12/10/2006     769999      1850
Goodman               12/10/2006     759500      1786
Warfield              12/10/2006     949000      2300
Warfield              12/10/2006     969000      2400
Meyer                 12/10/2006     739000      2202
Diamond               12/9/2006      939500      2106
Haynes                12/9/2006      775000      1939
Prospect              12/9/2006      715000      1424
Guadalupe             12/8/2006      749000      1411
Carnegie              12/8/2006      799000      1900
Juanita               12/8/2006     1079000      2931
Vista Del Parque      12/7/2006     1249000      2259
Meyer                 12/7/2006      789900      2387
Irena                 12/7/2006     1325000      2700
Paulina               12/6/2006      759000      1315
Harkness              12/6/2006      579000       939
Rockefeller           12/6/2006      640000      1681
Steinhart             12/6/2006      889000      1867
Belmont               12/5/2006      639000      1175
Esplanade             12/5/2006      949000      1246
Avenue C              12/5/2006     2150000      3878
Clark                 12/4/2006      749500      2093
Carnegie              12/4/2006      759000      1888
Warfield              12/4/2006      919000      2120
Havemeyer             12/4/2006      795000      1900
Armour                12/4/2006      679000      1064
Dufour                12/3/2006      538000      1368
Pacific Coast         12/3/2006      990000       876
Anita                 12/2/2006     1295000      2573
190th                 12/2/2006      739000      1739
190th                 12/2/2006      739000      1694
Anita                 12/2/2006     1295000      2573
Calle de Madrid       12/1/2006      900000      1014
Vista del Parque      12/1/2006     1075000      1645
The Village           12/1/2006      445000       619
Juanita               12/1/2006      969999      2212
Artesia               12/1/2006      775000      2000
The Village           12/1/2006      799900      1458
Ford                  12/1/2006      699000       914
Vanderbilt            12/1/2006      619000      1728
Robinson              12/1/2006      959900      2856
Rockefeller           11/30/2006     555000      1427
Carver                11/30/2006     599000       761
Spreckels             11/30/2006    1575000      3269
Voorhees              11/29/2006     535000      1195
Catalina              11/29/2006    1399000      2145
Carlson               11/29/2006     769000      1900
190th                 11/29/2006     650000      1034
Irena                 11/29/2006     949000      2003
Morgan                11/29/2006     799000      2500
Vanderbilt            11/29/2006     549900      1070
Grant                 11/29/2006     565000      1598
Grant                 11/28/2006     629000      2061
The Village           11/28/2006     974500      1923
Helberta              11/28/2006     845000      1961
Avenue D              11/28/2006    1499000      1648
Bataan                11/28/2006     899900      2521
Sierra Vista          11/28/2006     789000      1034
Elena                 11/27/2006     979000      1884
Speyer                11/27/2006    1670000      3600
Elena                 11/27/2006     989000      2196

                      MEDIAN         849500      1912
                      AVERAGE        946974      1916
                      MIN            379000       410
                      MAX           3200000      4300

The median asking price has been pulled from $872,000 down to $849,500.

This first chart shows the distribution of listings by square feet. The median is 1912 sq ft.

This second chart shows the distribution by asking price. The median is $849,500.

This last chart is a plot of square feet versus asking price. Extreme high end data points are not shown.

The summary I have for December sales is as follows. There are 36 data points - I eliminated one because I was unable to find its square footage. Median sale price dropped very slightly:

MEDIAN    702250   1590
AVERAGE   763402   1675
MIN       475000    812
MAX      1400000   3324

Here is a distribution of what sold, by square feet:

Here is a distribution of what sold, by sale price:

And here is a plot of what sold, square feet versus sale price:

We need a lot more data, over several months, before we can be sure it really tells us anything. So this is just speculation. But from this data the sales activity is heaviest in the $550K-$650K price range. The most heavily transacted square footage is more widely spread, with the heaviest ranges being 1000-1500 and 1750-2000.

The most recent listings, on the other hand, show the heaviest concentration of square footage in the 1500-1750 range, and asking price in the $750K-$800K range. Notice that the square footage concentration in the recent listings appears to "fill a gap" in what sold in December. Does that say anything about what's "hot" or "cold" in Redondo Beach? We'll have to keep checking the numbers month to month to see - maybe more finalized sale data will fill that gap.

Redondo Beach statistics - take 2

Oops! I made a substantial error when I crunched the December sales data and so I deleted the prior statistics post. DOM was calculated incorrectly. I have now fixed that. Median DOM is less than 3 months, but still climbing at 77 days. The rest of the posting is now corrected.

Here at the South Bay Beach Cities Bubble blog, we like to crunch the Redondo Beach real estate numbers. I guess some would call it a geek spectator sport! While we're waiting for the DataQuick numbers for December, I thought I'd look at what information I already have and then compare it to DataQuick later this month to see how far off I am.

At this point in my database construction, I would estimate that I am missing about 20% to 30% of the listings out there. But if I have a good representative sample of listings and of sales, and the numbers are sufficiently large, then that factor should not weigh heavily.

Domania seems to be really behind on updating its sales records from late November on. So I just manually searched Zillow and then updated by hand those sales for which I had inventory records, all the way back to early November.

Of my inventory records, so far I've only found 37 matching sales records for December. (MelissaData recorded 43 sales apiece in each of 90277 and 90278, so there is a lot of missing sale data out there!) The numbers I have are listed here. I went ahead and calculated the Median, Average, Min, and Max of the original asking price, the final sale price, the DOM, and the percent reduction (PCTRED) from the original asking price. PCTRED is positive; if it is negative, that means the final sale price was more than the original asking price.

Reed                  9/21/2006   739000  12/26/2006   719000   96   2.7
Marshallfield         11/4/2006   644500  12/22/2006   644500   48   0.0
Axenty                10/11/2006  819900  12/22/2006   735000   72  10.4
Morgan                10/2/2006   834900  12/22/2006   800000   81   4.2
Esplanade             8/30/2006   640000  12/22/2006   635000  114   0.8
Ruxton                9/11/2006   709000  12/22/2006   690000  102   2.7
Marshallfield         10/19/2006  589000  12/21/2006   586466   63   0.4
Paseo de la Playa     5/18/2006   839000  12/21/2006   639000  217  23.8
Robinson              10/18/2006  609000  12/21/2006   589000   64   3.3
Rockefeller           11/6/2006   609999  12/20/2006   610000   44   0.0
Avenue D              10/18/2006  985000  12/20/2006   945000   63   4.1
Grant                 11/12/2006  669000  12/19/2006   659000   37   1.5
Broadway              10/10/2006  974900  12/18/2006   929000   69   4.7
Emerald               10/18/2006  699000  12/18/2006   704500   61  -0.8
Esplanade             10/2/2006   895000  12/18/2006   825000   77   7.8
Vanderbilt            9/18/2006   809000  12/15/2006   799000   88   1.2
Ripley                6/21/2006   869000  12/15/2006   700000  177  19.5
Grevillea             9/17/2006   598000  12/15/2006   598000   89   0.0
Paseo de la Playa     9/21/2006   799000  12/15/2006   795000   85   0.5
Garnet                10/11/2006 1195000  12/14/2006  1285000   64  -7.5
Phelan                10/4/2006   610000  12/13/2006   595000   70   2.5
Huntington            7/25/2006   774900  12/13/2006   650000  141  16.1
Van Horne             9/27/2006   829900  12/13/2006   839000   77  -1.1
Grant                 10/24/2006  529000  12/13/2006   565500   50  -6.9
Aviation              9/15/2006   535000  12/13/2006   475000   89  11.2
Francisca             9/28/2006   895000  12/12/2006   880000   75   1.7
The Village           5/30/2006   639999  12/12/2006   600000  196   6.3
Juanita               9/28/2006   829000  12/12/2006   805000   75   2.9
Armour                10/17/2006  699000  12/8/2006    683000   52   2.3
Stanford              9/8/2006    889000  12/7/2006    795000   90  10.6
Rockefeller           10/11/2006  749000  12/6/2006    739000   56   1.3
Huntington            10/15/2006  939000  12/6/2006    940000   52  -0.1
Mathews               8/9/2006    629000  12/5/2006    565000  118  10.2
Rockefeller           7/10/2006   599900  12/5/2006    538000  148  10.3
Camino de las Colinas 10/11/2006 1349000  12/5/2006   1299500   55   3.7
Calle Miramar         7/7/2006   1649000  12/1/2006   1400000  147  15.1
Carmelita             8/4/2006   1099000  12/1/2006   1025000  119   6.7

                     MEDIAN       774900               704500   77   2.7
                     AVERAGE      804646               764364   90   4.6
                     MIN          529000               475000   37  -7.5
                     MAX         1649000              1400000  217  23.8

ASKING is the original asking price that I was able to trace for a property. Keep in mind that I calculate DOM from the original listing date that I have recorded for a property, not what the last relisting date was in the MLS. So as you can see, DOM (days on market), is climbing, with average DOM now smack at 3 months (90 days). For November, raw average DOM for the beach cities, according to Shorewood, was about 60 days. Some of this difference is due to the way I calculate DOM - from the first ever listing date, not from the last relisting date. Plus of course, Shorewood's number is for all the beach cities, not just Redondo. In addition, my figures tend to understate DOM, because I only started compiling these records in late September, and for listings I took out of local paper advertisements at that time, I entered the date of newspaper publication as the original listing date of a property, when in reality a property featured in an ad was already listed for some time before that paper's publication.

As this market progresses, I expect PCTRED to tighten up as market participants get a clue and come to the realization that they aren't likely to get their full-blown fantasy asking prices. The smart realtors who can persuade their clients to do so will list properties at asking prices at much closer to real time sales figures, not what something might have sold for in the late spring of 2005.

But on the other hand, I could be totally wrong in placing faith in the market participants gaining wisdom. January 2007 sales figures for Redondo Beach, 90278 in particular, are looking the best they have in a year, and this could be pumping back up expectations of a boom market. (Never mind that sale activity in the rest of the beach city zip codes ranges from sluggish to dismal.) But I think it is a bear trap. Since New Year, new inventory for Redondo is hitting Zip Realty at a rate of over 3 properties a day. And by "new", I mean, property that is really a new listing, or at least not an expired listing since before late September. Even though Zip Realty calls them new listings, I am not even counting the relistings that been hitting Zip Realty, though I am recording price reductions in my records. So while sales might be pumped up, inventory is also coming on the market early and quickly.

And speaking of new inventory, this is what I have for Redondo since New Year:

The Village        1/12/2007    464000
Lucia              1/12/2007   1995000
Steinhart          1/12/2007   1275000
Pearl              1/11/2007    850000
Calle Mayor        1/10/2007    859000
Pacific Coast      1/10/2007    925000
Prospect           1/10/2007    388000
Grant              1/9/2007     875000
Morgan             1/9/2007     769000
Perkins            1/9/2007     650000
Paseo de Gracia    1/9/2007    1299000
Guadalupe          1/9/2007     879000
Esplanade          1/9/2007    2690000
Broadway           1/8/2007    1279000
Curtis             1/8/2007     749000
Blossom            1/8/2007    1219000
Pullman            1/8/2007     919000
Garnet             1/8/2007    1375000
Calle Mayor        1/7/2007    1895000
Juanita            1/7/2007    1399000
Juanita            1/6/2007    1369000
Calle Mayor        1/5/2007     709000
Grant              1/5/2007     799000
Vanderbilt         1/5/2007     529900
Grant              1/4/2007     839000
Felton             1/4/2007     689900
Grant              1/4/2007     829000
Ralston            1/3/2007     869000
Juanita            1/3/2007     939000
Pacific Coast      1/3/2007     730000
Paseo de la Playa  1/3/2007    1395000
The Village        1/3/2007     379000
Guadalupe          1/3/2007    1650000
Belmont            1/2/2007     799900
Irena              1/2/2007     919000
                   MEDIAN       872000
                   AVERAGE     1017176
                   MIN          379000
                   MAX         2690000

And here is what it looks like charted:

If these figures are any good at all, then they are telling us that there is this built-in expectation of major price gains between what sold in December and what is now being asked in January, at least by the new market participants. Notice the jump in median from $704,500 to $872,000. By the way, there are many high end properties being listed. Not captured in these figures are two Esplanade properties, each with an asking price over $3 million, listed just before Christmas.

When I have better sales figures, I will try and update these calculations. The high end sales seem a little thin, judging by the first graph above.

Monday, January 08, 2007

National Media: Housing Slump Almost Over

Sheesh. There are so many news stories claiming the worst is behind us in the housing market I don't know where to begin. Then when I turned on Bloomberg TV this morning, I got nauseated at the site of David Lereah, chief economist of NAR, saying the market has pretty much bottomed. This clown talks out of two sides of his mouth. Out of one side he claims there is no national housing market, so there can't be any national housing bubble, but out out of the other side of his mouth he makes generalizations about a slump being over. He is due out with a book about how all property markets are local. Yeah, right. As this slump deepens and engulfs ever more "local" markets, I expect he'll be changing his tune to, "it's a property-specific issue!"

You can search the Google News to find a ton of news stories of realtors and industry analysts proclaiming the housing slump is over. But we are Angelenos, so let's see what the locals are saying about our local market.

Daniel Miller and David Nusbaum did a full year review in "Meltdown was more of a mixed bag", this January 8, 2007 Los Angeles Business Journal story (login/subscription required). They say that although "many affordable areas enjoyed a banner year", "many of the expensive areas got rocked."

Affordable areas enjoying a boom included Inglewood, where the median house price is now $585,000. (I disagree when they call that reasonably affordable.) For 2006, the price increased 15% and sales volume increased by 55%. Carson is another boom area, with prices increasing over 9% and sales voluming increasing 28%.

For L.A County overall, home sales declined 6.6%, while the median price from December to December increased 4.8% to $550,000. Now, who hit the skids?

The pricey areas - Malibu, Beverly Hills. Malibu sales declined 45%, and prices fell 15%. A composite of three Beverly Hills zip codes saw sales drop 35% and prices drop 38%.

Regular blog readers here know a lot of this already. The South Bay beach cities can join the list of "pricey" areas that have been in a slump.

What else is this article saying? One realtor is quoted as saying, "every particular marketplace has its own distinction", which is just another way of saying "it's all local." Ralphael Bostic at USC Lusk Center for Real Estate notes that "discretionary sales" (AKA speculation) "have been taken off the market", which has hit the high-end market.

The 30 Los Angeles County zip codes with the greatest price appreciation were populated with affordable homes. (You know what that means!) The median price in this group was $500,000, below the $550,000 for the county overall, and prices were up 11% from a year earlier. Number of sales in this group was up to 68,124 units, up 20% YOY.

On the other hand, the 30 zip codes that have been getting clobbered are the more expensive areas, where median price is $770,000, with price up only up about 3% from last year. Number of sales in this group was down to 24,276 units, down 38% YOY.

The experts are saying the market has weathered the brunt of the storm, with the hits taken mostly last year. By a dictionary definition, "brunt" is the principal foce, shock, or stress (eg., from an attack). They go on to say the county market will not experience anything like the price collapse of the early 1990's, and they resurrect that tired argument about how unemployment is low, blah blah blah. "We might see a little more price erosion and decline in sales, but ... the fundamentals are good...because so few people moved last year, there has to be pent-up demand..." blah blah blah. The public is happy and comforted that the bottom didn't fall out.

Overall, this is just the same Polyanna talk we were reading all last year. Take a look at some of the highlights of 2006, while you look at this chart of the median price for the beach cities through November 2006:


Southern California coastal areas would increase from 6% to 12% over the next 12
months - Leslie Appleton-Young, CAR

"Economic fundamentals of recent years will remain mostly intact in 2006, giving rise 
to a cautiously optimistic outlook for the year to come.  All in all, sales in 2006
are expected to decline by 2% to 622,300 units.  More and more households will need
to stretch their purchasing power with innovative forms of financing in order to buy
a home in 2006." - CAR

December Sales "take a holiday."  - Shorewood

NAHB reports that the Housing Opportunity Index for the LA-Long Beach-Glendale area
has fallen to 2.3 (compared to Q1 1994, when it was 45.2).

Real Estate Wealth Expo advertised for April.

South bay home sales hit a 12 month low - Shorewood


Los Angeles (housing market) not down and out yet - L.A. Times

Dataquick calls the real estate market a "normal real estate cycle."


Foreclosure activity hits 2 year high.


Sellers' New Math (L.A. Times) - "the market is normalizing", which is "quite 

Slowdown could settle in for a stay (L.A. Times) - market is "more normalized."


Hold off on that panic attack (L.A. Times) "Relax" (to paraphrase Charles Schwab) - 
inventories are falsely inflated from frivolous homesellers fishing for top dollar.


Mortgage default notices up.

Homesellers being targeted in latest Nigerian scam (L.A. Times).

Buyers Biding Time (Los Angeles Business Journal) - sales volume over the last 
several years has been "healthy".

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


Anxiety Complex - "it's hard to accept that prices are going down" (L.A. Times)

Buyers play wait and see - staying on the housing market sidelines can make or break 
you (L.A. Times).  Translated, buyers who wait are losers.  Gamblers in the market 

California residents decide Golden State is tarnishing - "Our amenities are being 
outweighed by some of the perceived costs (Daily Breeze).

Enrollment slide pinches Hawthorne schools - also true for many districts, such as 
Santa Barbara, Los Angeles Unified, etc, posting years of consecutive losses, due to 
people leaving because of high housing costs (Daily Breeze)


More Homeowners Going into Default - "We have a lot of people who got mortgages when 
they really shouldn't have qualified" (L.A. Times).  But "I don't think it's time to 
panic...this is a natural turning of the business cycle..."

More homeowners turn to St. Joseph.

Capitol Hill looks to tighten homeownership writeoffs.


Home Sellers saw big profits in October (L.A. Times), but where did the windfalls 

"It's going pretty good - I love California."  L.A. Times quoting a homeowner whose 
house has tripled in value since 1997.


Optimism is rising on housing market (L.A. Times)

Maybe it's locution, locution, locution (L.A. Times) - How the words that describe a 
property can affect how easily it sells.  In the prior year market this wasn't even a 

A loan that'll get ugly fast - "I am rather screwed" (L.A. Times)

Construction industry recovers from slump (L.A. Times) - the fact was, more real 
estate and construction workers were hired in November than let go.  Does that equate 
to a slump being over?  In a Polyanna psychological environment, yes!

A year in realty time (L.A. TImes) - a cooling trend takes hold, becoming a chill in 
expensive and mid-range markets.  Home equity loans are out, second mortgages are in. 
McMansionization stirring up complaints in many neighborhoods.  Foreclosures leap 

Overall, they're only talking about putting the brunt of the storm behind us. They aren't saying a word about the possibility that we could just be entering the eye of the hurricane.

Friday, January 05, 2007

Real Estate $$$ Transacted through December 2006

Sorry these charts are a bit later than usual. I have not done any zip code aggregation as I mentioned in my intentions a month ago, and may defer it for the time being. But I have discontinued the column charts for dollar volume, consolidating two charts of columns into two lines on a single line chart. Doing this has cut down the number of charts I publish each month by 33%, saving me a chunk of time.

There was a good pickup of sales volume in quite a few areas, including the slumping beach cities. In a few cases the number of sales in a zip code exceeded that of December 2005, but since average prices for so many areas are down substantially, the total $$$ transacted remains down over last year. Some of the "affordable" areas, of course, remain strong. The pickup in sales appears to be extending into January, at least into these first few days of the month.

Of the beach cities, Hermosa Beach 90254 remains in the deepest slump, with dollar volume down over 50% on the moving average of the YOY dollar volume measure. Manhattan Beach 90266 chart lines remain pointed down, with YOY on the moving average down over 24%. Redondo Beach 90277 is down nearly 24% YOY on the moving average, but continues to rebound from the record -40% low from around July. Redondo 90278 is down over 31%, mildly recovering from a deeper -35% from around October. El Segundo 90245 has been the most resilient of the beach cities, but YOY finally fell below 0% in November and the signs are that the dollar volume there will continue its downward trend. The westside continues overall to remain in its slump.

Although there has been a good sales volume rebound in some places, the fact remains that there is a hangover of many many unsold homes from 2006. In addition there will be new inventory coming on the market for 2007. I expect it to start trickling into listings toward the end of January. Unless Los Angeles homeowners decide to stay put in 2007 and universally agree to not sell their homes, something I don't see as likely at all, there isn't any way any little blip in sales we see now is going to absorb that hangover. January might see some continuing rebound, but then after that I expect prospective sellers to start thawing out and coming out of the woodwork.

Dollar volume of real estate transactions in Torrance combined continues to decline at the same rate as in November. Inglewood/Lennox combined is softening, from over 29% YOY in November to over 20% in December. In Santa Monica combined, dollar volume has recovered mildly from -55% YOY in November to -45% now. Parts of South Central and the more affordable areas of Los Angeles continue to show positive numbers. Carson 90746 continues to do very well.

Here are December's YOY numbers. Click here for November's YOY numbers for comparison. Real estate on steroids (realtors fat and happy):

90305        126.1%    Inglewood
90746         30.4%    Carson
90301-90305   20.3%    Inglewood/Lennox combined
Doing very well:
90303         14.4%    Inglewood
90302         11.1%    Inglewood
90037          8.7%    South Central
90044          6.3%    Athens
Nobody's hanging in there! Slip sliding away:
90047         -1.8%    South Central
90260         -2.6%    Lawndale
90249         -6.4%    Gardena
90250         -6.4%    Hawthorne
90062         -7.9%    South Central
90502         -8.3%    Torrance
90066        -10.8%    Mar Vista
90043        -10.9%    Hyde Park, Windsor Hills
Losing a grip:
90301        -13.1%    Inglewood
90007        -14.6%    South Central
90304        -17.3%    Lennox
90016        -17.7%    West Adams
90045        -18.2%    Westchester
90232        -18.6%    Culver City
90744        -19.0%    Wilmington
90245        -19.0%    El Segundo
90501        -20.0%    Torrance
90008        -23.1%    Baldwin Hills / Leimart Park
90230        -23.3%    Culver City
90277        -23.8%    Redondo Beach (south)
90266        -24.1%    Manhattan Beach
90504        -25.0%    Torrance
About to go over a cliff (realtors getting hungry):
90035        -25.3%    West Fairfax
90018        -25.5%    Jefferson Park
90501-90505  -27.7%    Torrance Combined
90277-90278  -28.4%    Redondo Beach combined
90056        -29.5%    Ladera Heights
90732        -29.6%    San Pedro/Rancho PV
90717        -29.7%    Lomita
beach cities -30.3%    4 Beach Cities combined
90278        -31.3%    Redondo Beach (north)
90019        -32.6%    Country Club Park/Mid City
90275        -33.0%    Palos Verdes Estates
90293        -36.4%    Playa del Rey
90505        -36.6%    Torrance
90503        -38.1%    Torrance
90292        -41.2%    Marina del Rey
90064        -42.0%    Rancho Park/Cheviot Hills
90745        -42.7%    Carson
90034        -43.5%    Palms
90036        -43.8%    Park La Brea
90401-90405  -45.1%    Santa Monica combined
90291        -45.9%    Venice
Sliding down a cliff (realtors really hungry)!
90254        -50.2%    Hermosa Beach
90094        -64.8%    Playa Vista

If you are new to this blog, please visit the Beartopia regional tracker for an explanation of these numbers. This is not price data! The regional tracker shows real estate transaction dollar volume for most zip codes west of the 110 freeway and south of the 10 freeway. Our Google map tool shows where these zip codes are on a map.

Tuesday, January 02, 2007

Will CAR get it right in 2007?

In my opinion, not likely. Economic forecasters, not only amongst the California Association of Realtors, but everywhere, have proven time and time again that they simply don't have the tools to predict trend changes, so they "forecast" by predicting a little more of what just happened. As long as the trend is in place, you look like a genius just saying we're going to have more of the same. CAR practically admits it in one statement in its late-2005 forecast for 2006:

So what lies in store for 2006? The market and economic conditions that gave rise to an outstanding 2005 performance will generally prevail again in the year to come and contribute to another very good year...

I do not understand why CAR viewed the housing market conditions as so good, with their "cautious optimism", while affordability rates remain at such depressing lows. Why is that a reason to be optimistic? Isn't CAR concerned that census demographic movement trends are now showing a net outflow from California? Not only were ex-Californians frustrated at housing costs, even the illegal immigrants can't take it anymore! If people are net leaving the state, who is going to ride in on his big white horse and support the current bubbleminium prices?

What else did CAR say in late 2005? CAR did reissue a more subdued forecast midyear, but let's see what they were saying back in late 2005:

While the unsold inventory index is expected to increase somewhat in 2006, current inventory levels will remain lean enough to drive continued price appreciation in the year ahead. Meanwhile, new home building will again fall short of household growth in 2006, resulting in a long-run housing shortfall that will contribute further to higher home prices.
All in all, sales in 2006 are expected to decline by 2 percent to 622,300 units, still very strong by historic standards.

OK, those were the parts that CAR got sensationally wrong. Some parts of the 2006 forecast were correct, like the rise in the state median home price, though I think the actual price has overshot CAR's forecast. Even though the actual median price did not match, they were correct in predicting an upward trend for the state median home price. We know, however, that home prices are seriously cracking in an increasing number of areas.

So what is CAR saying for 2007? Home prices will decline 2% in 2007. Well gee, that sounds like a can't-miss prediction because that's recently what has happened in places like San Diego and Ventura counties. Sales are expected to decrease 7% - any decline is not expected to be as steep as what occurred in 2006, CAR says. But CAR wasn't really expecting a major sales decline in 2006, was it! And oh! The market is stabilizing!

We'll reassess things 12 months from now and see how CAR does. My opinion on what will happen in 2007 may be all wet too, but at least I won't tell you we're just going to have a little more of the same.

And by the way, Happy New Year!