Friday, December 14, 2007

L.A. Business Journal: L.A County home sales drop to new low in November

According to this story by Deborah Crowe in the December 10-16 edition (link may expire), home sale volume hit a record low in November since the housing market started declining. However, the price slide seems to have stabilized at least for the month. There were 2,680 November home sales. In 2006 there were about twice as many sales. In October there were over 20% more sales. November 2007 home sale volume is about 25% of November 2005 sales.

The median price for all of L.A. County remained at $525,000, down 4.5% YOY but unchanged from October. October was the first month of price decline since the housing market started its decline.

Patrick Duffy of MetroIntelligence attributes the sales volume decline in big part to "people who are stubborn and waiting for the market to return...they aren't willing to sell until they get the price they want."

Analysts think prices will continue to drop, but the optimists will only concede that prices will drop for a few more months, while the bearish analysts believe much more pain lies in store. Opinions vary along that range.

Syd Leibovitch of Rodeo Realty in Beverly Hills thinks sales will start picking up in December and beyond, with prices leveling off around February, when things normally start to pick up again. (Perhaps he can afford to be more optimistic, considering where he practices his business!)

Chris Thornberg of Beacon Economics feels that too much attention has been focused on subprime mortgage resets, when the major problem is that homeowners are unable to afford their mortgage payments all over the mortgage product spectrum. He points out that in the late 80's, the median income earner earned 20% less than what was needed to afford the median priced home. Today, that gap is 40%. He anticipates much more pain in 2008 and says the meltdown in the Inland Empire will eventually make its way here.

Places like Beverly Hills 90210 continue to do well in the housing market. In the South Bay, Mike Collins of Shorewood says sales are "propped up by buyers with ready cash. We are seeing a greater percentage of sales from the people who can just write a check for more than a million dollars." (Straight from the horse's mouth! High end sales are what are propping up the median prices here in Bubbleville Beach.)

Notices of default on mortgage payments in Q3 2007 were up 166% YOY to 72,751, the highest in 11 years. The increasing number of foreclosure and bank-owned homes that are going on the market, often with big reductions since their last selling prices, are dampening asking prices. One Prudential realtor who now spends about 75% of his time marketing REO properties said, "There's got to be something fundamentally wrong when a property goes into foreclosure less than a year after the loan was made."

-------------------------- SFR ----------------------------------
COMMUNITY          ZIP    Nov     %YOY        Nov     %YOY
                          Sales   Change      Price   Change
El Segundo       90245      6     -25.0%    $980,000   15.0%
Hermosa Beach    90254      9     +12.5%  $1,345,000  +26.3%  
Manhattan Beach  90266     19     -26.9%  $1,650,000  +19.6%  
Redondo Beach    90277      7     -36.4%    $970,000   +5.4%
Redondo Beach    90278     15     -25.0%    $781,000   +5.5%

------------------------ CONDO ----------------------------------
COMMUNITY          ZIP    Nov     %YOY        Nov     %YOY
                          Sales   Change      Price   Change
El Segundo       90245       1    -50.0%    $475,000  -20.2%
Hermosa Beach    90254       2    -60.0%    $495,000  -31.2%
Manhattan Beach  90266       0       N/A         N/A     N/A  $645,000 in 2006 
Redondo Beach    90277      10    -33.3%    $881,000  +14.4%
Redondo Beach    90278       9    -60.9%    $675,000   -1.5%

The most expensive SFRs in November were in Santa Monica 90402 (+26.3% YOY); Pacific Palisades 90272 (+30.3%); Marina del Rey (+22.7%); Palos Verdes Estates 90274 (+28.8%); Manhattan Beach 90266 (+19.6%); San Marino 91108 (+24.5%); Brentwood 90049 (-16.6%); West Hollywood 90069 (+24.9%); Malibu 90265 (+28.9%); and Mid-Wilshire 90036 (+25.3%).

The most expensive condos in November were in Pacific Palisades 90272 (-4.6%); Redondo Beach 90277 (+14.4%); Los Feliz 90027 (+73.2%); Redondo Beach 90278 (-1.5%); Santa Monica 90403 (-7.5%); Laurel Canyon 90046 (-2.1%); Marina del Rey 90292 (-23.3%); Venice 90291 (-41.9%); Studio City 91604 (+20.2%); and West L.A. 90025 (-13.4%).

The places experiencing the greatest losses in SFR prices are Long Beach 90813 (-50.9%); Long Beach 90804 (-35.3%); West L.A. 90025 (-31.9%); Whittier 90603 (-30.0%); Sierra Madre 91024 (-29.8%); Palmdale 93552 (-29.3%); West Adams 90018 (-28.5%); Inglewood 90301 (-28.3%); Inglewood 90303 (-27.3%); and Montrose 91020 (-26.3%).

The places experiencing the greatest losses in condo prices are Panorama City 91402 (-66.1%); Playa Vista 90094 (-51.2%); West Hollywood 90048 (-45.4%); Pacoima 91331 (-41.9%); Venice 90291 (-41.9%); North Hollywood 91602 (-40.7%); Long Beach 90804 (-40.4%); Koreatown 90005 (-38.1%); West Hollywood 90069 (-37.6%); and Monterey Park 91754 (-35.1%).

Notice that Playa Vista, a zip code that I regularly cite as a place doing booming dollar volume business, is on the list of places experience great price loss in condos. Sounds to me like they are building lots of relatively cheap condos there and making it up on volume.

Keep in mind that the article lists gains and losses on median prices on very small numbers of sales in a specific zip code, which are not statistically valid in most cases.


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