Wednesday, February 21, 2007

Other measures of beach cities market activity, January 2007

Shorewood has come out with January numbers.

The average DOM for the beach cities, by Shorewood calculations, is 65. The moving average shows 60. Keep in mind that my own calculation of median DOM and average DOM for Redondo Beach for January have been running at above 90. My calculation is somewhat closer to what some realties call "continuous DOM", or CDOM, which avoids the "reset to 0" problem for some relistings (though isn't foolproof). I wouldn't be surprised to see more realties adopt it.

In any case, the seasonality of our local market is apparent in the DOM chart. If the market continues its normal seasonality, I would expect the DOM to swing down a bit from here.

Here is my homegrown measure of "supply strength", which takes a ratio of inventory and sales. It has made a good recovery in January. However in my own records for Redondo Beach, I show 99 genuinely new listings coming on the market in January. That does not include properties being relisted since the end of September, which the realtors are more likely to count as new listings, so my count is conservative. Yet by Melissa Data, a total of 71 properties were sold in 90277 and 90278 in January. Perhaps a small handful of these were in Torrance, OK. That would leave fewer properties sold in Redondo Beach. So for January, 99 new listings, and less than or equal to 71 properties sold. There's a gap - not a big one - but when you still consider all the properties that were listed last year and not sold, is there pentup selling demand?

Here is the median price of a home sold in the beach cities in January. I would trust this more than what DataQuick tells us, because this data is an aggregation of the four beach cities and forms a larger dataset. It is coming off a low in January. I have also plotted a simple moving average.

This last chart is the %YOY change on the simple moving average of the median price. As you can see it's been down YOY for three months. If this is the year of the dead cat bounce before the storm from lender implosion hits us, we might expect this to rebound somewhat.

The bottom line is that beach city inventory still isn't rationally affordable and although some properties may look like "good deals" at the moment, they really aren't. Despite all the happy talk from realtors there is probably a lot more bottled up inventory than is being measured, and lenders are imploding. This is not a "bottom" from which lasting and sustainable recoveries are made.

By the way, if the current new listing trend continues through February, I will expect about 98-100 new Redondo listings for February. And many of them are in higher end property range.

Monday, February 19, 2007

South Bay Resale Activity for January 2007

Apparently I was mistaken about the changes in DataQuick's methodology. The firm is indeed making changes in its methodology that I described but the changes won't be applied uniformly throughout all the areas it covers. Apparently it is still reporting only RESALE activity for Southern California. And here I was hoping for a merging of new construction sales and resale activity. Oh well. At least Shorewood provides us a calculation of that.

And judging by how few sales are recorded in some of these zip codes for January, I am inclined to believe that Shorewood's data is consistently more reliable. When you're talking about only 6 or 7 SFR sales in a zip code within a month, it's difficult to come to any solid conclusions about median price trend. On the other hand, Shorewood aggregates sales data out of the beach city zip codes, and there is a large dataset as a result.

The thinness of data is evident in the zig-zagginess of the raw trendlines in the charts. Compare the trendlines of the individual zip codes with the trendlines for the Los Angeles county graphs, which contain literally thousands of data points, and are so smooth they really don't need to be represented by a moving average. We can clearly see from the Los Angeles County graphs that the trends have reached a "resting" point. YOY trends are hovering between 5% and 0%. Will the trends poke through 0? Stay flat? Rebound upwards?

Here is the resale activity for the immediate area. Just keep in mind what I said about coming to conclusions with such small sales numbers - and this is not a new problem or unique to DataQuick, by any means.

                          SFR   MEDIAN   %YOY    CONDO  MEDIAN   %YOY  
LA/Westchester    90045   24    $695    -13.1%     6     $469    20.7%  
El Segundo        90245    6    $760     -1.7%     4     $550     7.7% 
Hawthorne         90250   35    $545      1.3%     4     $392     0.5%  
Hermosa Beach     90254    7  $1,715     55.9%     3     $894    -0.6%  
Lawndale          90260    7    $570     10.2%     6     $329   -15.6%  
Manhattan Beach   90266   31  $1,308    -11.6%     3   $1,525    -2.9%  
Palos Verdes Pen. 90274   20  $1,600     -5.7%     1     $640   125.7%  
Rancho P.V.       90275   31    $929    -24.2%     2     $560   -15.0%   
Redondo Beach     90277    8    $865    -11.7%    14     $750    11.5%   
Redondo Beach     90278   15    $735     -6.4%    23     $659    -7.2%  

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. All charts graph RESALE activity.

Sunday, February 18, 2007

The flippers have not fled the market

Tonight I thought I'd try running a query on my records to see if I could determine what short sales, if any, are underway in Redondo Beach. I structured the query to look at my listing records that have not yet been marked sold, then match the addresses to my sales records, and pull up those where the difference between the prior sale date and original listing date of the current listing is no more than a year.

From the results there are a few that definitely appear to be in short sale territory, when you look at the difference between the prior sale price and the current asking price. Out of 40 good records, 8 have a negative difference (20%), and when you factor in real estate commissions and closing costs to complete a sale, there are more.

There are a number of properties, though, with a substantial markup (a doubling of price?!?) since the last sale. I have not examined these in detail, so it's very possible some of these are now entirely new construction while the prior sale was a teardown. But it's also possible that some of the more moderate markups are deliberate remodels/flips.

    Camino Real   402   3/15/2006       490000  12/16/2006     455000   -7.1%
    The Village   306   3/7/2006        950000  10/10/2006     849000  -10.6%
S.  Catalina      E     12/15/2005      920000  8/15/2006      940000    2.2%
S.  Juanita             10/15/2005      900000  6/19/2006      969999    7.8%
S.  Prospect            2/15/2006       775000  2/13/2007      809000    4.4%
S.  Catalina    101     3/15/2006       514000  2/14/2007      539000    4.9%
N.  Francisca           5/15/2006       700000  11/9/2006      735000    5.0%
    Sierra Vista        11/15/2005      700000  10/28/2006    1395000   99.3%
N.  Prospect            9/15/2005       860000  7/24/2006      799000   -7.1%
N.  Prospect            5/17/2006       775000  11/12/2006     949900   22.6%
S.  Helberta            3/15/2006      1100000  12/13/2006    1029000   -6.5%
N.  Lucia    B          4/15/2006      1150000  8/23/2006      979000  -14.9%
N.  Elena    B          1/15/2006       790000  10/24/2006     829900    5.1%
    Sapphire            10/15/2005      905000  8/20/2006     1299000   43.5%
S.  Gertruda            8/4/2006       1675000  8/28/2006     1799000    7.4%
S.  Pacific Coast       10/15/2006      800000  10/18/2006     990000   23.8%
N.  Maria               3/2/2006        804000  3/31/2006     1997000  148.4%
    Camino Real         7/15/2006       768000  9/25/2006      949900   23.7%
    Calle Miramar       3/15/2006      1100000  7/25/2006     1389000   26.3%
    Camino Real   101   2/15/2006       580000  2/5/2007       660000   13.8%
    Camino Real   104   8/15/2005       380000  8/6/2006       385000    1.3%
    Carver              9/15/2006       560000  11/30/2006     599000    7.0%
    Stanford            2/3/2006        731000  10/24/2006     775000    6.0%
    Morgan              8/15/2006       740000  9/20/2006      817000   10.4%
    Herrin              5/15/2006       682000  9/25/2006      769900   12.9%
    Pullman             5/15/2006       730000  10/28/2006     749000    2.6%
    Harriman            11/15/2005      900000  9/13/2006     1199000   33.2%
    Plant         B     11/15/2005      929000  9/13/2006      929000    0.0%
    Speyer              5/15/2006       750000  11/27/2006    1670000  122.7%
    Speyer              5/15/2006       750000  11/27/2006    1670000  122.7%
    Gates         2     2/22/2006       470000  9/22/2006      569000   21.1%
    Bataan        A     4/24/2006       890137  6/7/2006       894900    0.5%
    Mathews       A     2/15/2006       670000  10/25/2006     634900   -5.2%
    Ripley        A     11/15/2005      880000  10/10/2006     920000    4.5%
    Gates         B     2/8/2006        945000  10/25/2006     899900   -4.8%
    Felton              12/15/2005      769000  11/15/2006     745900   -3.0%
    Mathews       C     12/15/2006      665243  2/5/2007       699500    5.1%
    Vanderbilt    5     10/15/2005      614000  7/12/2006      690000   12.4%
    Pinckard            5/15/2006       800000  10/31/2006    1099000   37.4%
    Blossom             6/15/2006      1150000  1/8/2007      1219000    6.0%

This list does not include the townhouse across the street from me, which was new construction sold in December 2004 for $899,000, was put on the market in late August 2006 for $1,200,000, was reduced to $1,049,000 in early October, and has languished since. if I'm reading the county tax assessor correctly, the property taxes are delinquent. On the other hand, this list does contain the property a block east of us, which is now bank-owned. I spot-checked a few of the addresses in this list but didn't immediately turn up any others in tax arrears.

Saturday, February 17, 2007

David Lereah is that you? "David" is posting comments to this blog

"David" has been leaving me comments telling me how despondent I am, LOL! Well I got news for you David, my happiness and whether I am despondent has nothing to do with whether I own Redondo Beach real estate or not!

By the way, a few long term housing bear analysts are suggesting that the real estate market will stabilize and find a bottom this year. I contacted one this week to see if his longterm outlook is different from his book. He said no, the Great Meltdown is still due to arrive later in the decade. Also, be sure to check out Housing's Stairstep Descent to get a sense of how a market can chop down, and how participant psychology can work.

Anyway, here is "David's" comment:

All the data is confirming that the Real Estate market - especially in Los Angeles is
on solid ground. Los Angeles is different than any other city in the US save New 
York. And I dont see prices there falling ethir. This is a transitional phase for the
 next move up. It might be another 4-5 years however prices are here to stay - will 
fluctuate only slighty and from that point on are going to edge up into the next run. 
Per my prevoius post if I were you I would most definatly buy NOW in Redondo Beach. 
As I said before Redondo Beach is undervalued.

Lets get real here. You are a dispondant becuase you are not a home owner. I can fix 
that. I have several great lenders and can get you on board with a great home loan. 
Why throw your money away on rent and feel so bad about it that you would set up an 
entire website dedicated to when youll get "your day" in Real Estate.

I'm sure you and your readers had chances to buy before the boom and turned it down. 
In the 80's you remembered the 70's and said "its overpriced - it will come down". In 
the 90's you remembered the 80's and said the same thing. Now its 2007 and you think 
it will return to 1999. See a pattern here?

The housing market is Los Angeles is here to stay. The data is 100% correct. Real 
Estate MAY go down eleswhere but not here. Everyone had been talking about the 
"bubble" (yawn) since 2004. Well here we are and prices have stabalized.

Real Estate always - almost without exception - go's UP.

You need to check out the houses here. Now is the time to buy. We have a great 
selection and assuming you can forgive my comments from before I can even be your 
Realtor. I have fantastic loan brokers and get you a good loan. Redondo is an 
absolute STEAL right now. I suggest you seroiusly consider a budget for a home there.

No thanks "David"! I don't want your loan, or you as my realtor. IF I wanted a realtor there are a few people I have in mind, but you definitely aren't one of them.

Friday, February 16, 2007

DataQuick announces changes to home sale tabulation methodology effective for January 2007

DataQuick has made changes in the way it is tabulating home sales that we should be aware of.

DataQuick is now reporting new home sales in addition to resale homes in its monthly data. The data is being revised back many years. This will result in a roughly 10% average monthly increase in home sale totals.

DataQuick is also switching from a "weighted median" to a "straight median" price. According to this link, "To calculate the weighted median of a set of numbers you need to find the median and if this number does not exist in the recordset, take the average of the values above and below the median instead."

So DataQuick may be have been throwing out a lot of averages at us all along!

You can read the DQNews press release here.

I think the changes will be a huge improvement. I find the timing a little questionable, but I think what DataQuick provides will ultimately be a lot clearer. I strongly disliked not having a comprehensive source of median data for both new and resale homes.

Thursday, February 15, 2007

L,A. Times: Home prices remain steady

The assurances that the Southland market is "nearing a bottom" continue to come in, according to this February 15 story by Annette Haddad. For the Southland, the median home price in January was $485,000, up 5% YOY according to DataQuick. Analysts are saying the market is "resilient", and the January sales decline rate of "only" 17% YOY is slowing down. (We'll ignore the fact that this was the worst January since 1998, OK?)

The article talks about the example of one existing homeowner in Torrance who wanted to buy a bigger home. He discovered that sellers were extremely reluctant to accept an offer contingent on him selling his home, and he ended up selling his own house first before continuing his house hunt. The article claims that the reluctance on the part of a homeseller to accept contingency offers is a sign of market strength, because a desperate seller would be more willing to accomodate a buyer.

I say - sez who? In a manic greed-driven market with prices rising like a rocket, why should a homeseller accept the encumbrance of a contingency offer, when he knows that he can wait for the clean and simpler unencumbered offer and get higher than his asking price to boot!? But in a bad market, where escrows are falling through because buyers aren't qualifying for loans, etc, of course homesellers are going to be reluctant to get tied up in an escrow that has a good chance of failing! So I say that kind of anecdote cuts both ways.

Over and over again I keep hearing that inventory is slimming down, and this article says it too. If the analysts are measuring inventory solely by what's in the MLS, without accounting for the number of properties that have been listed within the past year but did not get sold, that's a huge mistake. These analysts were trying to tell us last year that the inventory has been falsely inflated, due to frivolous homesellers out on fishing expeditions for top dollar. So, are all those fishing trips permanently cancelled?

What else is this article saying? A smaller-than-expected number of existing homes have come up for sale. The market started the year as a buyers' market and has quickly evolved more into a sellers' market again. "I thought we would be seeing a ton of properties hit by now, but there's definitely a pause", according to Re/Max in Orange County. But the president, Steven Thomas, hedges his bets saying, "this could be the calm before the storm."

I will inject in here that by the highest sales count possible, via Melissa Data, the new inventory coming online (as I was able to determine via Zip Realty) in Redondo Beach exceeded the Melissa Data sales figures by nearly 31%. (There may be a handful of properties in 90277 and 90278 that are technically in Torrance, but they wouldn't skew the difference by this much.) By "new", I mean, a previously listed property that just isn't a relisting since late September 2006. I am not even counting those, even though the analysts would count them as "new" in the Redondo MLS. The bottom line is that as far as I could tell for Redondo Beach in January, there was more inventory coming on than sales to absorb it.

I wanted to highlight separately the factoid in the article noted about time on market in Orange County. Apparently, the average time on market has declined from 6 months in January to 4.8 months in early February. I don't think a decline in time on market, by itself, is indicative of a recovery. One has to consider supply, demand, and price. When properties are priced very competitively, more buyers will come out of the woodwork, and the sooner the properties will sell. In order for that to happen, prices probably must have declined. I've also noted in previous posts that some properties in my area with extremely short DOMs might have actually been sold at auction.

Here is the January data for the Southland (hey, the numbers add up!):

Area           # sold    %YOY     med $$$    %YOY
Los Angeles    6,805    -6.9%    $520,000   +6.1%
Orange         2,400   -16.3%    $600,000    0.0%
Riverside      3,089   -34.2%    $415,000   +1.2%
San Bernadino  2,373   -28.5%    $370,000   +4.2%
San Diego      2,772    -4.3%    $472,000   -5.6%
Ventura          689   -14.3%    $565,000   -6.5%
Southland     18,128   -17.2%    $485,000   +5.0%

Wednesday, February 14, 2007

January 2007 Redondo Beach sales statistics preview

I still find it very odd that Melissa Data has been showing sales numbers over twice as high as the actual numbers of sales I can scrape out of Zillow or Domania. C'est la vie. So take these charts with a grain of salt. But it'll be interesting to see what numbers I come up with, because these sales include both new construction and resale homes. The numbers coming out of DataQuick are only for resale homes.

This first chart is my calculation of days on market (DOM) for all sales in my record collection for which I had supply (original listing) records. If you are new to this blog you may not know that I calculate DOM from a property's original listing date in Zip Realty, not the date it was last relisted. If my calculation of Redondo Beach is representative of the beach cities collectively, I'm probably coming up with an extra 30-40 days in DOM that the official statistics won't show.

The maximum DOM was 390 days (and was probably even more than that); the minimum DOM was 19 days. I got the impression the property at minimum DOM was actually sold at auction, rather than sold in a traditional way.

The second chart is the distribution of sales by sale price. It is pretty obvious where most of this market operates.

This third chart is the January sales by square feet.

The fourth chart is a plot of square feet versus sale price. If you are determined to buy a home this spring, bubble talk be damned, may I at least insert my 2 cents and suggest that you buy at a point well below the red line. I don't really believe it will matter in the long run but at least you'll temporarily feel like you got a good deal.

Finally, here is a chart of January sales versus inventory through January. I like to look at this and check for the disconnects between the asking prices in the inventory and the actual sales prices.

For the record, here are the statistics for the January inventory:

807000  1840    MED
950064  1895    AVG
379000   410    MIN
4990000 4700    MAX

And here are the statistics for January sales. I list the square footage, original asking price, the final sale price, the DOM, and the percent reduction from the original asking price:

MEDIAN  1691    770000   687360   106    5.4
AVERAGE 1733    829314   755148   129    8.9
MIN      619    435000   389000    19    0.0
MAX     4236   2199000  2100000   390   44.0

It looks like a number of higher end properties are on the market, despite little in the way of sale activity there. Conversely, see that large proportion of sales down in the $600K-$650K range, along with the corresponding relatively paltry inventory? I get the sense that there is steady demand for properties in that range. The median sale price in January was $687K but the median asking price in January inventory is $807K. To close that gap on the median sale price and median asking price, either buyers are going to have pay an extra 17.5%, or sellers or going to have to lower prices by another 14.9%. What's it gonna be?

Easy Reader: Get RICH owning real estate!

Just kidding. OK, the February 1 Easy Reader did not have a story of that title, but it did publish a few graphs that almost implied as such.

I do not claim to understand the point of this first graph. It is supposed to chart New Permit activity, yet the blurb below almost sounds like something out of a mutual fund prospectus - hang on to your house for more than five years and you'll get great returns. And the returns since 1998 have been stupendous! Of course, the mutual fund has to tell you, PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RETURNS. How come realtors aren't held to that same law??? And by the way, slumping permit activity is one of the leading indicators of a housing slump that San Diego builder Robert Campbell talks about in his book.

This second chart shows homesellers getting rich. Over the past three years, homesellers have reaped a median net profit of over $200,000 (the Easy Reader spells "reap" as "reep"). My big question is, where are they putting that money? Socking it away in T-Bills? Or are they putting it back into another financial market that is as equally at risk as the housing bubble?

I love this last chart. When the market starts getting bumpy, the brokers love trotting out these long-term gain charts in the hopes that you'll forget the rockiness of the past year. Look at how the California housing median decoupled from the national median, and then took off like the space shuttle Challenger in a big way starting around 1998.

Leslie Appleton-Young, chief economist of the California Association of Realtors, in a recent talk to local realtors, assured them that the only bubble in real estate was the one talked about "in articles about the bubble." The article then proceeds to redefine what "bearish" means by claiming that she was bearish in 2006. I got so pissed off about this that I actually wrote a letter to the editor asking, what do you mean by bearish? Oh and by the way, have you actually charted Shorewood's beach cities median price data recently?

Back to Appleton-Young. She says the 2007 market is "not falling off a cliff", but sellers will have to adjust their expectations away from double-digit appreciation, and buyers wanting a fire sale will also have to adjust their expectations.

Ms. Appleton-Young says "follow the inventory." She interprets inventory levels as "improving." Well, I see things a bit differently. I estimate the real inventory for Redondo Beach is roughly twice what the count of listings is in Zip Realty. Only 20% of the 724 records I have tabulated are resolved by sales, updated through February 1. Right now, new inventory is entering the Redondo Beach market at the rate of roughly 3.5 properties a day, from what I see in Zip Realty. That does not include relistings. Much of this new February inventory is ridiculously Fantasyland high-end, that most of us would not even consider, so I doubt it will move quickly. Heck, the Fusion condos will probably sell out before some of this high-end stuff moves.

Well I will agree with Ms. Appleton-Young that the bubble didn't exactly burst in 2006. But it got its first dose of paper cuts.

L.A. Times: It's their default position - "The rest [of the real estate agents] are looking for side jobs at McDonald's. It happened overnight."

This February 13 story by David Streitfeld gives us a glimpse into the lives of some realtors who are being realistic about the future. Home Center Realty services the Inland Empire area.

David Hennigan, one of the realtors featured in the story, looks over the list he gets from United Title Company of the homeowners who have recently received notices of default, and spends his time trying to cultivate relationships with these homeowners. Hennigan gets a list every 10 days. He looks for homeowners whose homes still have substantial market value, and who he figures he might be able to help come out ahead in a sale. He ignores the homeowners who owe more on their homes than they are worth - he can't save them.

Hennigan thinks the market is going to get a lot worse. You don't hear that from a realtor very often, do you! When Hennigan makes surprise visits to homeowners in the afternoon, he brings along another agent to sit behind the wheel of the car and keep the engine running, "Just in case someone comes out with a shotgun."

Amusingly, Ron Barnard, the chief executive of Home Center Realty, and whom Hennigan has been working with side by side, is the optimist. He figures buyers are sitting on the sidelines but that "they'll come back" in the summer. But he has a strong plan B in place "just in case" the market does not come back. He wants his agents to learn everything possible about foreclosures. Home Center President Jason Bosch actually believes the market will soon resemble that of the early 90's, and then get even worse.

How's that for a different kind of realty?

Friday, February 09, 2007

L.A. Times: Sub-prime loan market shaken up - "It means a lot of people are going to lose their homes"

This story is a bit late being posted, but it remains important nonetheless. The ongoing financial health of mortgage lenders has been a hot topic. There is now a website dedicated to tracking lender implosions. This February 8 story by E. Scott Reckard discusses the train wreck of New Century Financial Corporation, a sub-prime lender right here in our backyard (Irvine). According to the L.A. Times story, New Century has just reported "huge losses" on sub-prime mortgages to borrowers with bad credit, high debt loads, and other financially undesirable traits.

Last year, as home sales started leveling off, some lenders loosened their lending standards to try keeping the gravy train rolling. That's like giving even more crack to a cokehead. New Century has reversed course and started tightening their loan policies, but guess what! Those who got loans with easy-money terms from 2004 are going to find it impossible to refinance this year! These borrowers will be trapped when their loans reset.

The article states as much as $800 billion in AR mortgages are going to reset higher this year. 1 out of 11 home loans is both adjustable and sub-prime, according the the Mortgage Bankers Association.

Investors are starting to back away from mortgage-backed bonds, which are created from pools of very risky mortgage loans.

Another sub-prime casualty in our area is Ownit Mortgage Solutions of Agoura Hills, which has filed for bankruptcy protection. Investors who purchased Ownit mortgages were demanding that Ownit purchase them back after they had gone bad, and Ownit's response was basically to shut down.

In a potentially related story, what's with the busier than usual turnover in the Federal Reserve? Fed Governor Susan Bies is resigning and will not be at the March meeting. Her term was supposed to run to 2012. She is regarded as the resident expert on banking and risk management. Hmmm. The heads of the Atlanta, Chicago, and Boston Federal Reserve banks are all being replaced this year.

Monday, February 05, 2007

WallStreetBear: A Homeseller's Rant

You can see the original post here. The posting comes courtesy of Wall Street Bear, owned and operated by John Leabeater. The poster is a bearish friend we know as "Crash." In 1997, he shrewdly bought a HUD house in Riverside for about $71,500 for his daughter to live in while she attended school. Due to some unfortunate family circumstances, the family is now selling the house. Being the sharp housing bear that he is, he's been pricing his home very competitively, has had tons of looky-loos traipsing through the place, has seen it fall out of escrow twice... I'll let him continue at this point....

Buyer Canceled.  It is becoming abundantly clear that...

A plague of real estate agents (more than 500,000 in California), many with ambitions
to upgrade to brokers (ours just passed her exams), wanting to join the 30% of agents 
who are, does not mean better service to sellers and buyers. It does mean new, 
creative efforts to maximize return with minimal effort.

Brokers formerly required agents to hop in the van to review new listings, visit open 
houses, and generally familiarize themselves with the better portion of the 
inventory. Now, its an internet search, and abstractions expressed as polished 
language substitute for real impressions. Consequently, the agent showing our 
offering is often very surprised at how well it shows. More might show it, if they 
had better prepared to serve their clients.

It is also clear that most clients are shown homes they cannot afford. If they can 
afford $250K, they are shown ours listed at $329K. Buyers will overreach, and their 
agents and lenders are pushing them to do so.

The Inland Empire market accelerated from a more reasonable base about 2001, when 
LA/Orange businesses began expanding here to better access a work force that could 
access affordable housing. The immigration of new business and the overshoot of 
workforce and their families have bid up housing prices by 140% in six years, and 
overwhelmed the infrastructure program, with its daily new detours and freeway access 
interruptions. MetroLink corridor rights purchased years ago cannot be used because 
developer cronies and neighboring home owners don't want spineless politicians to 
plan public transportation in their backyard.

Our listing at $329K likely would have sold for more than $360K earlier in '06, but 
now it is headed on a round trip back to an '01 price of $150K. Can we sell it 
meanwhile, for about $300K, on the way down? That is the question.

Turning back the clock a generation, I recall lender guidelines for affordability 
typically requiring gross income approaching four times housing costs (PITI basis). 
Now, there are "programs", assisted by County and State if income is within criteria, 
or by sellers Frown , which pay buyers' closing costs, and more. There are programs 
for sub 600 FICO scores, some even advertise they do not consider FICO at all. For 
these, the true interest rate may be several percent above prime mortgage rates, but 
"you qualify" is the joy that gets spread. I suppose such mortgages are then bundled 
and resold through Fannie et al, as new threats to investors like us who will park 
funds in the money market. Frown

Many home "buyers" only seek "cheap" housing, mailing in the keys to the lender 
before payments rise above teaser levels. California makes that so convenient with 
nonrecourse loans for original purchase. With a nonrecourse loan, only the property 
is collateral, and not the borrower's income and assets! A foreclosure deficiency 
cannot be claimed by the lender, and the debt cancellation for the deficiency (when 
mortgage balance exceeds fair market value ... ie what the lender realizes when he 
liquidates the foreclosed property) is not even income on the defaulting borrower's 
tax return. Not so if you live in 49 states, but it is so here in California!

I estimated that, by 1965 standards, a family income of $140K would be required to 
qualify for a 100% mortgage to buy the "starter" home we are offering. Of course, no 
more than 80/10 would have been offered then. Today, 80/20 seems the norm, but the 20 
is for reduced term and higher rate, so actually more than $140K income should be 
required to qualify. I have reason to believe that home "buyers" being shown our 
house typically make less than $50K. Sometimes there is obviously more than one 
family "cooperating" to buy. About eight people were led by a realtor through our 
house yesterday. They were disapointed that there were only three bedrooms. You would 
think their realtor would have already informed them!

Well, we do count our blessings, and we can afford to wait for something reasonable 
to happen, having bought this home for our (now disabled) daughter's use when she was 
a college student, paying only a carefully calculated $71,233 in a HUD auction. The 
purchase served it's purpose, and then became a nice "piggy bank" ... so whatever 
happens will be OK.

Well, this posting rambled long, longer than intended ... so back to the markets ...

BizJournals Los Angeles: Poll: Homes to still increase in value

I don't know if there is any real value in taking polls asking people about where they think home values will go. They've been hearing so much in Los Angeles press about how much the rate of price gain has slowed, but Los Angeles County overall still had a price gain for 2006 - what do you think they are most likely to answer for 2007?

Pretty much more of the same! Only 10% of the respondents anticipated a big move up or down. 21% said prices would stay flat, 35% thought prices would be a hair more, 31% thought a hair less.

You can read the poll results here in a February 2 story from Los Angeles Business from bizjournals.

Sunday, February 04, 2007

Unresolved inventory as of February 2, 2007

No, the graph below isn't a picture of New Year confetti, it's just a plot of square feet versus current asking price (accounting for reductions or increases to the original asking price) of all my inventory records for which I have no sales resolution. The shape or color of the plotted point is insignificant, I just thought it would be better to look at than a blob of blue diamonds.

In these 548 records, the median sqft is 1843 and the current asking price is $804,500. In a previous post, I calculated the median original asking price for those properties that sold in December as $809,000. So when I took this inventory snapshot, it appeared that, for now, the market has been catching on and lowering its asking price overall. When I look at certain individual properties for which asking prices have inexplicably been raised, I shake my head in disbelief, but they must be really in the minority.

When you consider that my list of unresolved inventory has the flaw of not excluding properties in which the seller truly changed his mind about selling, and resolved the situation by staying put, renting out the place, or some other means, then those properties do not show recent price reductions in the data. However, I am working on the assumption that those properties are a very small percentage of the overall list. For those sellers we hear have been going out on fishing expeditions, I assume they will keep trying to fish. There are lots of listings in my collection with no changes to the original asking price at all, even though the property has been listed for many months.

This second chart is of the Days on Market for the same unresolved inventory. I come up with a median DOM of 112 and an average DOM of 116.

One must consider again the effect of the records in which the homesellers really changed their minds, as discussed above - their entries would skew DOM upwards. But, there are also a bunch of records in my collection in which DOM is way understated. These are the ones that were first entered into the database at the end of September, since I took the records out of open house listings in the local papers, rather than online listings, and entered a listing date as the date of the paper publications, when in reality those properties were probably on the market for some time already. If I am lucky those two problems could cancel each other out, but over time I expect those properties with erroneous listing dates to get sold and drop out of the unresolved inventory, while the problem of homes that have backed out of the market remains.

Let's also look at how the asking prices distribute in this unresolved inventory. How does this compare to what I assumed about December inventory compared to December sales? One thing I notice is that December inventory category in the $450K-$500K has shrunk way down. In the December chart, inventory in the $450K-$500K range was about 12% of the outstanding inventory. Now, it has gone down - oops!

Maybe I goofed somewhere. Or maybe there has been a big uptick in sales in that category. Is there a way I can find out?

Reviewing my spreadsheet for December 2006 inventory versus December sales, I did find one error. Here is the corrected chart. Notice that the $450K-$500K category has now shrunk, and when you look at the light periwinkle colored bars, the shape of the graph looks very much like the February inventory graph.

Here is the December chart with the error:

If I take a sneak peak at January sales, this is what I find:

STREET                          SALEPRICE    SQFT    PCTRED    DOM
S.       Broadway       C          715000    1503       3.3    105
         Calle Miramar            1325000    2799       5.3     92
         Pearl                     615000     890      23.0    106
         Esplanade      103        607000    1359      24.0    221
N.       Guadalupe      A          815000    2253       4.7    100
         Garnet                    899000    2507       7.8    212
S.       Prospect       205        469000     977       7.1    110
         Pruitt                    570000     756       3.2     86
         Harper                    610000     756       8.3    161
         Ernest         A          979000    2320       1.6    103
         Mathews        C          755000    1885      24.1    390
         Vanderbilt     2          520000    1070       5.3     81
         Vanderbilt     4          510000    1070       9.3    103
         Marshallfield             579000     768       0.0     71
         Grant          2          562000    1598      16.0    204
         Mathews        3          610000    1710      11.5    204
         Vanderbilt     C          660000    1609      13.0    197
         Gates          C          620000    1974      12.9    143

         MED                       612500    1551       8.0    108
         AVG                       690000    1545      10.0    149
         MIN                       469000     756       0.0     71
         MAX                      1325000    2799      24.1    390

I notice that average DOM has gone up considerably, skewed upward by the sale of five properties on the market at 200 days or longer, including one of my poster children! Median DOM of 108 for sneak peak January sales is pretty close to the median DOM of 112 for inventory as of February 2.

Although with such a small sample size for January sales, it's really too soon to say definitively how everything played out in January.

Friday, February 02, 2007

The bear's lament: struggling with sales and inventory data for Redondo Beach

As some of you know, I started keeping my own property listings of Redondo Beach homes for sale starting in late September. I wanted to get better measures of how long it really takes to sell a house here.

I'm also keeping tabs on sales. Unfortunately, there seems to be a number of problems with sales records. It makes me wonder how the data reporting agencies like Trendgraphix or DataQuick manage to report anything reliably. The biggest problem I see is that not all sales, as reported from what I find in Melissa data, make it into any form in Domania or Zillow. A bunch of sales records just aren't there, or they just aren't easy to pull up. Another major problem is that the sales record does not always accurately reflect the square footage and rooms of a property, making it darn difficult to match with an inventory listing. This happens in the case of a remodel or new construction that has been sold. It's not unusual for a sale record to show 9 square feet! This makes it a problem to compare square feet versus sale price, or to do good frequency distributions by square feet. It makes it too difficult to compare the square footage of what has just sold with the square footage of what is up for sale. The sales records will understate the square footage. The MLS listings look far more accurate when listing square footage and rooms, though such listings are not perfect. I've tried to use the county tax assessor as a third source of data, and I honestly wonder if the county collects all the taxes it's supposed to get, because there are properties that appear in sale records that don't ever seem to show up in the tax assessor records, many months after the sale. But I'm not about to go down that direction!

As an example, Melissa data tells me that in December 2006 there were 43 sales apiece in 90277 and 90278 for a total of 86. These zip codes are Redondo Beach, though little tiny pieces of Torrance do spill over into these zip codes. I don't think there is enough Torrance spillover, though, to explain that I can only find a total of 61 sale records through Domania and Zillow. What happened to the remaining 25? To add to the problem, Zillow has great data but a terrible user interface for getting to it. On the other hand, I can semi-automate data extraction out of Domania, but Domania does not tell me the exact sale date, only month and year.

And of those sale records, I don't have a listing record to match each sale, which means that for that sale, I cannot calculate days on market, or keep track of what the original asking price was and how much the price has been reduced. I sure hope realtors have all that data at their fingertips AND the tools to access it, because I would think they would need to know this kind of information to factor in whenever they list a property for sale.

Getting back to my data collection problems - what I've ended up doing is just updating the sales fields on my listing records when I stumble across sales records that match. In my December example, from 86 hypothetical sales, I can find only 61 sale records, and of those, I've got only 49 matching inventory records. Then maybe out of those I have to throw away a few because no square footage was recorded either in the listing or the sale.

Then there is the problem of what to present. At this point I can scrape up only 47 sale records for December. If I expand that to Q4 2006, I've got 98 records, but this collection is heavily weighted to December. In a market that's changing pretty quickly, presenting data on sale price and what square footage sells at that price, spread out over an entire quarter, can be rendered useless equally quickly. Probably better to just present December data, to juxtapose against January, even though there are so many fewer records.

So knowing how limited this data is, I tried to compare December 2006 sales (47 records) against my unresolved inventory (566 records, properties that had been listed at some point since late 2005, but had not sold by the end of December 2006).

The inventory statistics are summarized as follows:

           Ask Price SQFT
MEDIAN     799900    1824
AVERAGE    907681    1871
MIN        379000     410
MAX       3200000    4700

The December sales statistics are summarized as follows:

            Orig Ask      Sale Price    SQFT
MEDIAN        809000      735000        1751
AVERAGE       821785      776850        1771
MIN           529000      475000         812
MAX          1649000     1400000        3324

This first chart shows the two series compared to each other. The dark blue diamonds are inventory and the red squares are sales. Linear trend lines are drawn in. Each point plot (square feet, price). For inventory it is current asking price, and for sales it is sale price.

This second chart blows up the area where the median values fall. The large yellow square is the closet value to the median sale "point." The large yellow diamond is the closest value to the median inventory point.

It's nice to see how inventory and sales scatter next to each other, but these charts don't really tell us anything about which categories of square feet or price sold the most frequently. Where is the bulk of this market?

For December 2006, it appears the bulk of the market was in the $750K-$800K range. In this third chart, I've taken frequency distributions of the inventory and of the sales, then I divided the number in each category into its total for that category to get percentages. So 11% of the inventory falls in the $450K-$500K range but there were few buyers for that range. Why? Are these properties located in less desirable areas? Are they little 1 bedroom 1 bathroom boxes? Are they major fixer uppers that nobody wants to spend half a megabuck to fix? Notice how 45% of sales were covered by three ranges: $550K-$600K, $600K-$650K, and $750K-$800K. That's difficult to ignore - in those ranges, buyers feel like they are getting something.

I guess to complete this exercise, I should do the same percentage distribution by square feet. I've been on this computer all day so I have to stop here, but will include it next time I try this.

UPDATE: See this post for a correction to that last chart.

REPOST: Real Estate $$$ Transacted through January 2007

This is what I get for being a day early. Melissa data made a late update to January data. The data I posted before is not truly accurate. I don't want to leave you with false impressions, so let's see what has changed. If you missed it, you can click here for my very flubbed post!

Overall, little has changed, but the westside and some other areas have rebounded a bit better than I first thought. On a raw sales volume basis, some of the zip codes that still seem weak YOY include 90254, 90277, and 90505. Some zip codes that show a plunge in raw sales volume (maybe the buyers stayed in from the cold) include 90016, 90044, 90056, 90260, 90293, 90303, and 90304. Some zip codes that came close to exceeding what they did last year in terms of sales volume include 90045 and 90732. Zip codes that met or exceeded what they did YOY, some by a substantial amount, include 90047 (L.A.), 90064 (Rancho Park), 90066, 90266 (Manhattan Beach), 90275, 90278 (my home - north Redondo), 90291, 90293, 90302, 90303, 90502, 90503, and 90504.

I am almost positive that the bubble denialists and the soft-landists will start calling this a recovery, so be prepared for it. I remain very very skeptical. Inventory is still there, despite what CAR says, and affordability remains near record lows. What are buyers going to do if they are determined to pay lower prices and sellers refuse to lower their asking prices? Gee, do you think some of them might wait, since there is more inventory to peruse? Do you think some of them might get pissed off and leave the state? That's happening!

The market is "stabilizing" in the area circled in red. Don't be surprised if you hear it!

Here are my corrected beach cities charts. Notice the uptick on the raw data (blue line) - my erroneous chart showed that continuing to point down. The area circled in red in the first chart above is the "stabilization."

Here are my corrected area coverage charts. My comments about what's happening in the overall area still seem valid.

Here are the reposted %YOY change rankings. I think my previous comments about how a YOY number below 0 may not necessarily be indicative of anything unless there is "chronic pain" remain valid.

Real estate on steroids (realtors fat and happy):

90305         79.6%  Inglewood

Doing very well:

90746         12.4%  Carson

Hanging in there!

90303          5.2%  Inglewood
90301-90305    3.3%  Inglewood/Lennox combined
90302          1.2%  Inglewood

Starting to slip-slide away:

90249         -0.5%  Gardena
90502         -0.8%  Torrance
90044         -2.1%  Athens
90037         -4.4%  South Central
90047         -5.5%  South Central
90250         -5.9%  Hawthorne
90066         -7.8%  Mar Vista

Losing a grip:

90062        -11.3%  South Central
90007        -14.6%  South Central
90260        -14.9%  Lawndale
90016        -17.7%  West Adams
90035        -19.4%  West Fairfax
90045        -20.0%  Westchester
90043        -21.5%  Hyde Park, Windsor Hills
90501        -21.6%  Torrance
90301        -22.5%  Inglewood
90008        -23.1%  Baldwin Hills / Leimart Park
90275        -23.3%  Palos Verdes Estates
90019        -23.3%  Country Club Park/Mid City
90230        -23.7%  Culver City
90501-90505  -24.2%  Torrance Combined
90504        -24.7%  Torrance

About to go over a cliff? (Realtors getting hungry!)

90717        -25.2%  Lomita
90018        -25.5%  Jefferson Park
90732        -26.3%  San Pedro/Rancho PV
90278        -28.4%  Redondo Beach (north)
90277-90278  -28.7%  Redondo Beach combined
90277        -29.1%  Redondo Beach (south)
90266        -29.5%  Manhattan Beach
90293        -31.1%  Playa del Rey
90505        -31.8%  Torrance
90503        -31.9%  Torrance
90245        -32.6%  El Segundo
beach cities -33.1%  4 Beach Cities combined
90064        -33.3%  Rancho Park/Cheviot Hills
90232        -33.5%  Culver City
90304        -35.2%  Lennox
90401-90405  -36.1%  Santa Monica combined
90292        -39.4%  Marina del Rey
90291        -42.1%  Venice
90744        -42.5%  Wilmington

Sliding down the cliff (realtors' stomachs are growling):

90036        -45.2%  Park La Brea
90254        -51.1%  Hermosa Beach
90034        -51.7%  Palms
90745        -53.3%  Carson
90056        -55.8%  Ladera Heights
90094        -60.3%  Playa Vista

Hurrah! Our poster child at 2102 Swehtam sells!

Our poster child property has finally sold, on January 19, 2007. This was the property I posted an anniversary cake for, remember. The property was on the market for well over a year. From its original asking price of $995,000 to its sale price of $755,000 is a markdown of over 24%. This property is one that I believe really illustrates how some homesellers got caught in the trend change at the top.

This condo was sold to the sellers 11/08/2004 for $710,000. Incredible that it went on the market in late 2005 at $995,000, about a year later, at an over 40% markup. Geesh, what were they thinking? Real estate never goes down? When I explained that 40% markup to my significant other, he responded, "It sounds like they got what they deserved."

The new sale price is 6.3% over the previous sale price. How much of that gain is being consumed by closing costs? I wonder about this sale - was it an auction, perhaps? I think the sellers were very lucky they weren't skinned alive, crucified, boiled in oil, and tarred and feathered.

GoBig, if you're reading this, any idea why Zillow would post a sale of $46,863 on the same sale date?

Thursday, February 01, 2007

Real Estate $$$ Transacted through January 2007

ARRGGH! Melissa data did it to me again - publish data very late! Their late update has affected the data here, so ignore my comments until I do a REPOST. Stay tuned. - The Bear

UPDATE. OK, I will leave the comments here but I am deleting the charts and the YOY rankings. Go to my REPOST for more accurate charts and data.

The absolutely best thing I can say about the data for January is that, on a raw number basis, 90291 and 90293 exactly matched their sales volumes from January 2006, while 90066, 90278, 90293, 90404, 90502, and 90503 exceeded their sales volumes from a year ago. If I were looking for a "bright spot" in this market, as realtors and the L.A. Times so much like to do, I could say that there were more real estate commission opportunities in these zip codes compared to a year ago. That's all I can spin about this market.

In a number of places the sales volume is easily cut by 50% or more, on a raw basis. What really got my attention while plotting January's data is that even in the "affordable" areas which have been held up as the salvation of Los Angeles county real estate, there are lots of lines plunging sharply down in January. A few places, like Rancho Park (90064) have paused for breath. In some places the sales volume was so low that I was sure that Melissa data was not done with the January updates. That is always a possibility, so I will fix anything I miss in the February charts.

You're going to see pretty soon that there are increasingly few places where the %YOY change on the moving average of dollar volume is not below 0. By this measure, this area is bleeding.

The bubble denialists may try to tell you that the super cold weather we've had kept people at home so they weren't buying houses. Seriously, is 90278, which did OK in terms of sales volume, that much warmer than 90277 or 90254, which had very weak sales volume? The bubble denialists may tell you that things will be much brighter in February and March. When looking at these historical charts, I would have to agree that the January-February timeframe is when dollar volume tends to bottom for the year. So if we're going to have a rebound, it'll be starting from here or from February if the pattern of the last several years holds. We'll see some uptick in sales volume, and in dollar volume. We might even see median price flatten or start wobbling back up. But, in spite of what CAR is saying about reductions in inventory, I've got 550 records of Redondo Beach SFRs and condos for which there were listings since early last year, and with no sales recorded. By *new*, I mean, a new listing or a property that hasn't been relisted since before the end of September, when I started my own inventory tracking experiment. Since New Year, the new inventory number has been growing by about 3 a day. If inventory growth continues to outpace sales as it has been, I have every confidence that reluctant buyers will continue to wait. And I haven't even bothered counting the RB properties that have been relisted since the end of September.


I've been thinking about recent articles in the L.A. Times that have upheld the "affordable" areas of Los Angeles county as the "bright spot" of the county's real estate market. So what I thought I would do is make a comprehensive graph of all the zip codes I cover, south of the 10 and west of the 110, excluding 90247, 90274, and 90710 (they have wacky data I don't understand). This aggregation includes some of the "affordable" areas as well as the more affluent westside areas. As you can see, whatever is going on in the "affordable" areas in southwest Los Angeles county is not enough to prop up this region. The graphs are shaped remarkably like those for the four beach cities.


I'm starting to wonder if the %YOY change rankings have any relative value. Most zip codes have dipped below 0% by this point. Realtors who had gotten used to the good life have got to be feeling this bleed, and I'm sure NAR plans to keep dropping $40,000,000 on more full page ads to keep their members in business. A few formerly hypercharged areas, like Playa Vista, are now down YOY, though it does not mean anybody is feeling any pain yet. I would expect the places that are chronically down to be in the most pain.

YOY rankings deleted

Details for a specific zip code are available in the Beartopia tracker. Another version of the tracker is in our Google map tool. By the way! It looks like I forgot to upload a modified .php page last month, so you weren't able to see the new charts that replace the old column format charts. Sorry about that! That is fixed now.

Why such fast turnaround?

I've been updating my inventory records and am trying to figure this one out. A property sold on Calle Mayor for $625,000 December 14, 2006. This is a condominium built in 1977. The prior sale date for which there is history is April 3, 1981, for $55,000. So this wasn't a new property sold by a builder.

Now this property has popped up for sale again in the listings, in late January. It is priced at $700,000.

How can this be? What gives? Is this a quick flip? Did somebody change their mind about home ownership? (I've heard of such things!) Did somebody already have trouble making the first payment? Anybody out there have any knowledge of this?