Los Angeles Business Journal: Drop in number of homes sold (in February) is deeper than expected

Los Angeles Business Journal (subscription required) reports in its March 12-18 edition that the number of homes sold in Los Angeles County is hitting three year lows. The print copy sub-headline says "Prices stayed up, however." I think that is very misleading.

According to HomeData Corp, there were 3,661 homes sold in the county, a 31% decrease in sales volume YOY. The USC Lusk Center of Real Estate, which I've long believed is just a branch of the National Association of Realtors, puzzles, "we probably haven't seen this since about 1999...on the other hand, it has been lower, for example during the 1991 recession." The article does cite the sub-prime implosion as one factor leading to this mess.

The time it is taking to sell all homes on the market is also rising. February numbers are not available, but according to the California Association of Realtors, that time was 7.3 months in December and 10 months in January. In January 2006 it was 6.2 months. The experts have been saying a "healthy market in equilibrium" should have about a six month supply of homes. I think this applies to Los Angeles County. For the state as a whole, a CAR news release states that for January this was running at 9.1 months. The article also states average DOM as 63 days for Q4 2006, compared to just 28 days in the same period in 2005. Again, I think this applies to Los Angeles County.

The article claims that the median price for Los Angeles County was not much affected, at $550,000 in February. The price has been hovering at that level for about 11 months now, and is up 4.8% YOY. "Anecdotal evidence" suggests that "high-end" market activity is picking up. Malibu, according to Coldwell Banker, had 41 homes drawing multiple offers in February. One West Los Angeles home received 57 offers and was bid up from $1.2 million to $1.5 million.

Robert Kleinhenz, deputy chief economist of CAR, does concede that inventory is rising and it is "hurting" the market. "...increases in inventory [in L.A. County] are beginning to show up in terms of sales and probably in terms of prices as well." Gee, wasn't Leslie Appleton-Young assuring us that inventory was declining, just a few short months ago?

With sales volume way down, county's "overall housing picture remained cloudy". Really? I agree that when sale volume gets very low it is difficult to draw meaningful statistical conclusions about price data, but I think the trend is rather clear. Also, a handful of high-end blockbuster sales in the luxury areas don't help the average Joe and Jill Schmoe who want to buy or sell a house.

This article continues the trend of falling back on a "widespread consensus" that the strength of the local economy "should prevent any collapse in the housing market", like what occurred in the early 90's. Gee, if the economy is so healthy then how did housing prices get so out-of-control to begin with?

Isn't it amazing how the media continues to find one straw to cling to in the continuing stream of bad news over the past year? Some months back, the L.A. Times talked about the more "affordable" areas like Carson, Compton, and South Central Los Angeles being the "bright spots" of Los Angeles County housing market. Now this article pins its hopes on places like Malibu. How about all the rest of us and all the places in-between?

Here are some Home Data numbers for the South Bay:

          Feb SFR Sales   %       Feb Median (1000's)  %        
ZIP Code  2007   2006     Chg      2007     2006      Chg
COUNTY    3,661  5,309   -31.0%    $550     $525      4.8%   
90045        24     17   +41.2%    $735     $755     -2.6%
90245         1      5   -80.0%    $970     $879     10.4%
90250        41     33    24.2%    $549     $539      1.9%
90254         4      5   -20.0%  $1,288   $1,101     17.0% 
90260         5     16   -68.8%    $565     $600     -5.8%
90266        19     26   -26.9%  $1,799   $1,530     17.6%
90277        10     17   -41.2%  $1,128   $1,129     -0.1%
90278        22     21     4.8%    $738     $849    -13.1%
90501         8     20   -60.0%    $574     $651    -11.8%
90502         3     11   -72.7%    $495     $501     -1.2%
90503        12     13    -7.7%    $740     $756     -2.1%
90504        10      9    11.1%    $530     $600    -11.7%
90505         9     10   -10.0%    $760     $732      3.8%

          Feb Condo Sales %       Feb Median (1000's)  %        
ZIP Code  2007   2006     Chg      2007     2006      Chg
COUNTY      877  1,324   -33.8%    $426     $405      5.2%   
90045         2      4   -50.0%    $551     $406     35.7%
90245         3      5   -40.0%    $630     $465     35.5%
90250         7      3   133.3%    $580     $330     75.8% (includes Centex Fusion)
90254         2      2     0.0%    $922     $478     92.9% 
90260         2      3   -33.3%    $395     $370      6.8%
90266         2      3   -33.3%    $746     $659     13.2%
90277         8      6    33.3%    $718     $984    -27.0%
90278        17     16     6.3%    $740     $857    -13.7%
90501         4      7   -42.9%    $525     $447     17.4%
90502         8     21   -61.9%    $384     $320     20.0%
90503         9     11   -18.2%    $525     $580     -9.5%
90504         2      2     0.0%    $474     $346     37.0%
90505         4      2   100.0%    $342     $852    -59.9%

My own belief is that those buyers who were "tired of waiting to buy" have been going out and buying. They are the buy-the-dippers. It remains to be seen whether they will get their butts sliced on granite countertops, but I think the trend will eventually lead to that.