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%