Sunday, March 30, 2008

Recent history of Redondo Beach asking prices - and other notes

I've spent some time this weekend trying to resolve some unresolved inventory records in my database. My database has been running pretty much evenly divided by inventory records that have sale records and those that don't. I am almost at 2000 records.

Keep this in mind as you hear realtors talk about "pent-up buying demand" over the coming months. What I never hear realtors talk about is pent-up selling demand. I have a database of nearly 1000 unresolved inventory records for Redondo Beach.

Anyway, back to the history of asking prices. I thought I'd look and see if asking prices have gotten any more reasonable over the course of time. The chart is the median of original asking price of properties newly listed in that month, not the current asking prices of all unresolved inventory.

It looks like asking prices have come down, somewhat. Ignore that crazy spike at the beginning of the graph. That just means my database was not populated yet and I have very few inventory records at the beginning of my dataset. The data gets more richly populated, and presumably more accurate, over time.

I'm assuming the slight rise we are seeing now is in anticipation of a spring selling season. So far there is no evidence of a bounce yet in the home sale numbers, but I have been seeing a few properties in my area get sold, and quite a few For Rent or For Lease signs going up.

I should probably add a moving average. This month, I added a lot of new bubbly construction from Merit Real Estate to my inventory table which may also account for the slight rise in asking price.

One realtor knocked on my door last week while I was taking a shower, and I was kind of sorry I missed her. She's the same lady who knocked on our door last June and invited us to an open house (and she did get that house sold, though the original asking price of $760,000 and the final sale price was $670,000). She left a sheet of recent sales in the neighborhood. I very much appreciated that she didn't try to calculate a median sale price as if to imply that that is what homes are worth. She didn't try to dazzle me with statistical bullshit - she simply listed the sales.

But she left another sheet of paper talking about FHA loans as an option in financing a purchase. Let's see - no income limit, no sales price limit, no FICO score requirement, no reserve requirement - haven't we heard this someplace before? Oh yeah! The subprime mess and the credit market meltdown! Only now the FHA is insuring lenders by collecting premiums from the borrowers. Oh, they throw in one stipulation - bring 5%, no questions asked. I suppose that's better than 0% down, but doesn't leave me any assurance that credit restrictions are really all that much tighter.

This just drives home why I am so bearish. Assuming for one wild and crazy moment that the government succeeds in reinflating this bubble, and the Ginzu falling knife shoppers come pouring back into the market and get FHA loans, do you think that the FHA is going to be able to collect enough in premiums to compensate for potential losses?

If this decline continues, victory for realtors will mean being able to convince sellers to lower their prices and get properties sold. But they won't tell you in the local papers how much the seller had to reduce his original asking price to get a place sold. I am working pretty hard to tally those statistics and publish them here, since you won't get them elsewhere.

Monthly dollar volume charts will get published next weekend. Stay tuned.

Wednesday, March 26, 2008

Featured gems in the Redondo Beach market

Gem #1

This is the best price for a single family home in south redondo. Seller wants to sell. Good location one block east of pacific coast highway. Walk to beach, pier, and restaurants. The interior has fresh paint, new carpet and vinyl kitchen and bathroom - this could be a darling beach cottage.

This was originally listed for $649,000 and is currently listed at $499,000. 560 sqft, 1 bed, 1 bath.

Gem #2

Bank owned affordable family home with pool in redondo beach. Open floor plan with tile floors. 3 bedrooms and 2 baths downstairs. Newer master suite with bath and walk in closet upstairs. Additions have been made. No warranties or guarantees expressed or implied regarding legality of additions. Buyer and buyer's agent to inspect and approve property. Property in need of some cosmetic upgrading. Pool will be cleaned and will be operational. One bathroom was in process of remodel. It was never completed.

1528 sqft. Originally listed by the bank for $634,900 in early March and currently lists for $619,900. The original owner defaulted on a $560,000 loan.

This is what one of my bearish friends tells me $619K fetches in Little Tulsa (I think Colcord, OK).

4661 sf on 2.25 acres Exquisite 1 story! 3 open living areas. Vaulted wood ceilings. Huge formal dining room w/fireplace, sunroom w/Jacuzzi off master. prof. landscaping. Pool, hottub, gazebo greenhouse, surrounded by towering trees. Circle drive, 3 car side entry garage.

Another bearish friend reports the following U-Haul rates.

26-foot truck, 1794 miles:

Redondo Beach, CA to Tulsa, OK ... $2,753
Tulsa, OK to Redondo Beach, CA ... $830 

Tuesday, March 25, 2008

Standard & Poors: Los Angeles area median housing price down -16.5% for January 2008

The Case-Shiller index was released for January 2008.

According to the index, the Los Angeles area median home price was down -16.5% from January 2007, and down -3.7% from December 2007.

To view the full report, visit Standard and Poors (PDF file). S&P's home price website is here.

Ruxton Pacific development brings in the Big Guns

Some of you may recall my earlier posts about the new Ruxton Pacific development. According to this Shorewood press release, the developers have brought in a hired Big Gun realtor to get these units sold. According to Shorewood,

Recent shifts in the local market call for advanced marketing techniques in order to reach buyers and inspire them to make offers. Ed and his in-house marketing team literally reinvented the marketing approach at a newly-built project in South Redondo Beach last fall. That project, Paseo de la Playa, sold out in just 30 days.

According to this release, 3 units are now in escrow. I think some of this "advanced marketing technique" involved knocking the price down. These properties were originally marketed in the price range of $749,000 - $810,000. Now they start at "just" $679,000.

The realtor, Ed Kaminsky, is one of THE most successful realtors in the area. Even if my worst-case apocalyptic predictions about the area come true he'll survive. If a realtor is really good - if ANYBODY is really good at their job, they'll manage to eke out a living.

Another of these "advanced marketing techniques" is auctions. You definitely want to check here for upcoming Redondo Beach property auctions. Some of these properties have been on the market for ages.

I still believe there is a bounce coming. In the meantime, if you are curious about the units that are being marketed with advanced techniques that "reach buyers and inspire them to make offers", you can visit the website here.

Daily Breeze: Home prices continue slide

Here's the link to the original article at the Daily Breeze, but the newspaper expires its links, so you can find it below.

Take note of what the realtor quoted in the article, Rose Pasqual, says. Then compare it to what you read on Shorewood's website. I think you'll find her assessment of the situation more dire.

Notice that when too few sales occur in a city it gets dropped from citation when aggregating statistics. That might explain the declines we saw in February for the beach cities.

Another realtor notes the shift in composition in housing units sold and how it can affect statistics. That's true, but there is some rationalization at work here, trying to blame a potential drop in median on the high number of new lower-priced senior condo units coming on the market. "But it won't affect my home value." Were they saying that when all these bubblicious dot condos and bloataminiums were being built and sold during the boom?

By Muhammed El-Hasan, Staff Writer
Article Launched: 03/24/2008 09:39:04 PM PDT

The South Bay housing market continued its slide in February, with some communities 
seeing a double-digit drop in home prices, according to a report released Monday.

Excluding the Palos Verdes Peninsula, the South Bay saw its median home price decline 
7 percent last month, compared to a year earlier, said the report by the Los 
Angeles-based California Association of Realtors.

That brought the area's median - the middle figure where half of homes sold for more 
and half sold for less - to $600,000 for February's median price.

The decline erased the area's January increase of 0.4 percent as fewer houses were 
selling and fewer buyers were looking.

"We have too much inventory," said Rose Pasquel, who co-owns Coldwell Banker Harbor 
Coast Brokers in Carson.

She noted that "the entire state of California is considered a declining market."

Still, the South Bay generally fared better than Los Angeles County. Its median price 
fell 12.7 percent to $460,000.

The Palos Verdes Peninsula saw a drop in median price of 0.4 percent to $1,150,000. 
But so few homes sold on The Hill that none of its four cities were individually 

A city or community must sell at least 30 homes during the month to be cited.

Manhattan Beach, one of the highest-priced cities in California, also was left off 
the list of communities. That was the case with Hermosa Beach, El Segundo and inland 
areas such as Lawndale, Lomita, Carson and Gardena.

Gardena's absence from the February report was unusual since the city usually meets 
the 30-home threshold.

Gardena and Carson will see tough times as many homeowners with adjustable-rate 
mortgages can expect loans to reset higher, Pasquel said.

"I think this is just a first wave of problems," Pasquel said. "This is just the 
first wave of mortgages to reset. So we have '09 and '10 to deal with. So I really 
hope that the government can do some sort of freeze on mortgages that are about to 
reset. That would really help."

Pasquel noted that the housing markets in inland cities such as Carson and Gardena 
differ significantly from the more affluent beach cities. Inland cities often draw 
first-time home buyers, who needed adjustable-rate mortgages and zero-down payment 
programs to afford homes during the real estate boom.

For February, Redondo Beach saw a price drop of 12.7 percent to $655,000. San Pedro 
was down 12.4 percent to $438,000. Hawthorne fell 10.9 percent to $482,750.

Torrance's drop was in the single digits, at 5.3 percent to $539,250.

Yet the beach cities as a whole - including El Segundo, Hermosa Beach, Manhattan 
Beach, Redondo Beach and Playa del Rey - saw the median price rise 22.5 percent. That 
rise is consistent with a similar increase in January as some newer, more expensive 
homes have been selling.

Realtor John Parsons warned that the monthly median prices can vary widely, depending 
on homes sold.

For example, a 191-unit senior housing project near the South Bay Galleria could 
lower Redondo Beach's median home price, he said.

"It's at the low end of the market," said Parsons of Horrell Realtors in Redondo 
Beach. "The average unit is probably in the (mid-$400,000) range. So these things are 
quite a bit below the median. If enough of these pass escrow, it could cause the 
median in Redondo to hit the floor. But it won't affect my home value."

Parsons, a Redondo Beach planning commissioner and former councilman, said that home 
sellers are becoming more realistic as the housing market continues to decline.

Monday, March 24, 2008

Other measures of Los Angeles beach cities market activity, February 2008

Shorewood has published February statistics. I have to laugh because the headline on the front page of the website reads, "BEACH HOME SALES PERK UP IN FEBRUARY COMPARED TO PRIOR MONTH" but when you read the meat of the statistics, it still looks pretty bad!

According to Shorewood, February average DOM for the four beach cities was 51, down from 60 in February 2007. On such low sales volume relative to last year, I'm not sure if there is anything meaningful here or not. Not knowing anything else, I would have assumed that with the slight bounce in February sales relative to January, maybe buyers were coming back in the market for spring. But March is not looking particularly good, so that pulse beat we got in February might not have meant too much.

My preliminary February calculation for Redondo Beach with only 25 records came up with a median DOM of 119 days (4 months), and an average DOM of 133 days. This is pretty consistent with what I've been calculating. Remember, I start counting days from when a property first shows up for sale either in the MLS or on Craigslist, I don't start counting days from the most recent relisting! I honestly think my calculation gives a better indication of how long it takes to sell a property in Redondo Beach, assuming the property is priced very competitively and the buyer can obtain financing.

Supply Strength (Demand Weakness) still remains pegged high in February, though down very slightly from January. This chart compares inventory to sales. According to Shorewood, there were 66 homes sold in the four beach cities in February, compared to 128 the year before. There were 595 homes for sale in February, compared to 475 the year before. Inventory is up +25.3% and sales declined -48.4%.

The February sale price median was $884,000, up 2.2% from $865,000 in February 2007.

Saturday, March 22, 2008

CAR/DQNews February 2008 report for Redondo Beach

The following figures are from the California Association of Realtors (CAR) for February. CAR gets its figures from Dataquick. DataQuick overwrites that link every month, but here is the CAR link.

The median price for a Redondo Beach home (new or existing, SFR or condo) is now $650,000 down -12.67% YOY. For February, that is based on 47 sales, which is a decent number of records on which to calculate a statistic. Actually, this calculation is better than the zip code / property type breakdown calculation which DataQuick also reports, about mid-month. The former is an aggregation of new and existing home sales, SFRs and condos, in 90277 and 90278. The latter is relatively meaningless.

My preliminary calculation came in at $755,000, based on 25 records. I missed the mark.

Looking at the price history chart here, it is interesting to note that the price range seems to have fallen back into the 2004 area, which seems to be the point where the bubble really took off for its last big leg up.

Something does not add up here. DataQuick reports 60 sales for the beach cities, but when I add up Redondo, Hermosa, El Segundo, and Manhattan Beach, I come up with 84. This is the first time I've noticed this, and unfortunately I don't have convenient access to back data to check and see if this has been a consistent error. So I'll start putting these numbers in a table. In the meantime, I've sent off an email to DataQuick.

Area               Sales      Median Price       Year Ago      Pct Change
El Segundo            7         $540,000         $650,000         -16.92%
Hermosa Beach        15       $1,250,000         $959,000         +30.34%   
Manhattan Beach      15       $1,850,000       $1,839,500          +0.57%
Redondo Beach        47         $655,000         $750,000         -12.67%     
(they don't add up)
Beach Cities         60       $1,180,500         $963,500         +22.52%

For the South Bay area, DataQuick reports a median price of $600,000, down nearly -7% YOY, based on 252 sales.

The median home price in the Westside is $1,210,000, up +65.13% YOY, based on 35 sales. West Los Angeles median price was $752,000, up -0.92% YOY, based on 92 sales. Palos Verdes Estates recorded a median of $1,239,000, up +3.68% YOY, based on 13 sales, and Palos Verdes Peninsula area recorded a median price of $1,150,000, down -0.43%, based on 37 sales. Malibu is up +16.81% at $2,800,000, based on 11 sales, while Beverly Hills is up +18.10% to $1,925,000, based on 14 sales.

Overall, sales seem to have inched up slightly over January, and the affluent areas overall are holding up better, for now.

Friday, March 21, 2008

L.A. Times: As Southland counties reassess home values, tax bills fall - "It's not a good situation"

A March 21 story by Garrett Therolf gives more details to what a recent Bloomberg article discussed. Property tax officials around Southern California are getting busy reassessing home values, particularly ones sold after about mid-2004. Reductions in assessments are coming, though with sales still occurring, we're still seeing property tax revenue growth, because Proposition 13 limits are reassessed when a home is sold. That means that there is a leap upward in assessed value if the seller of an existing home had been in his home for many years, thus contributing to property tax revenue growth. Los Angeles County officials anticipate a 5% rise in overall assessed property value because of sales of existing homes and because of new developments - even with the plunge in sale volume.

Los Angeles County has reassessed downward over 41,000 properties to date, with an average tax savings for the homeowner of $660. Riverside County has been getting hit with 100 phone calls a day from people wanting to know when their property values will be reassessed. Riverside home owners received a tax break of about $500 on average last year. Orange County Assessor Webster J. Guillory reports that staff will be working lots of overtime - 10-hour days and weekends - to do the reassessment work. There isn't enough staff to do it.

Los Angeles County supervisor says the impact of the housing downturn will be tremendous, and "the chickens are coming home to roost. How many chickens is the question." Ventura County supervisor Peter Foy says "We're not at the bottom's not a good situation. It'd be nice if people felt their investment in their home was still what it used to be."

The last slump we had in the early-mid 90's gave officials a chance to improve their property tax assessment procedures. Appeal hearings backed up in the system at that time, taking as long as two years for appeals to get heard. Los Angeles County assessor Rick Auerbach reports "we are trying to be proactive so that we never have that many appeals again, because we don't have any more people to handle appeals now than we did then."

Oh, this downturn is shaping up to be quite a spectacle. As one blogger friend says, "Got popcorn?" Day by day the Southern California housing price premium is eroding.

On a personal note, I'm seeing my department at UCLA bracing for UC cutbacks. I am getting farmed out to other departments in the hospital in addition to doing the work I do in my own department, which is fine by me. I'd rather be overworked than underemployed, if you get my drift. I better milk it while my luck lasts.

Thursday, March 20, 2008

Six Redondo Beach properties hitting the foreclosure auction block

Check out my Nef Cortez link in the sidebar for foreclosure records for Los Angeles County. Here is the March 17 file (PDF).

This is what is coming up very shortly for auction.

242X Harriman Lane A
220X Perkins Lane B
52X  Cluster Lane
23X  Via Linda Vista
220X Huntington Lane 2
172X Rockefeller Lane

Listing activity is starting to pick up a bit. For the month it is now at the rate of 3.1 new listings a day.

I checked Melissa Data sales volume today and there is no sign that the bong hit from new higher conforming loan limits has benefited the market yet. Should sales continue at their present almost non-existent pace, I would guesstimate a generous 114 homes sold for the beach cities for March, compared to 200 a year ago. This is the month that sales normally start to accelerate for spring, so we'll see what happens by the end of the month. In the meantime, my client who works at Wells Fargo mortgages is not suffering from lack of work.

Bloomberg: California Leads U.S. in Defaults, Home-Price Decline - "The depth and magnitude of what's happening is really grim"

Wow, the other day I said something about the real estate tail wagging the economic dog, and this March 20 story by Daniel Taub and Dan Levy hammers home that point with some grim numbers.

California's Gross Domestic Product is predicted to drop 1.5% in H1 2008.

The state has the dubious honor of experiencing the most foreclosure filings of all the states for 2007, plus the greatest Q4 2007 price declines.

It is estimated that this most populous of all the states will lose $25 billion in personal income in 2008.

Property values are estimated to fall by some $630.7 billion, according to UCLA forecasts.

California gave birth to the sub-prime loan and is now paying the price. Nearly half of the 25 biggest sub-prime lenders were based here, and nearly 25% of sub-prime loans were issued here. 31,000 jobs were eliminated last year in the sub-prime mortgage industry. Employment fell 6.7% in the financial services, and employment declined 6.9% in the construction industry. Furniture retailers Levitz, Wickes, and Bombay have gone belly-up.

Half of the ten most expensive U.S. cities for home prices are in California.

The time it would take to deplete the supply of homes on the market at the current sales rate has more than doubled to nearly 17 months in January 2008, YOY.

In January, California had more foreclosure filings than any state. Stockton ranks #2 in foreclosure rates, Riverside-San Bernadino is #4, Sacramento is #5, and Bakersfield is #7.

But hang on, it gets better, or worse, depending on how you look at it.

The property tax revenue growth rate is declining. It is forecast to drop to 6% this year, then 3% in 2009. Personally, I'm surprised they are still forecasting revenue growth. I think this will turn into a decline soon. Applications seeking reassessments have more than tripled in San Diego within a year, and Los Angeles County is reviewing assessments on 310,000 houses and condos purchased since July 1, 2004. Reassessment applications are growing.

Standard Pacific Corporation, based in Irvine, has seen its share price decline by some 89% in 3 years. KB Home, based in Los Angeles, declined some 60%.

I'd sure like to know how a person making $36,000 a year managed to qualify for a $412,000 house in 2004!?! That must have been some real financial mortgage witchcraft! I mean I'd love to live in the redwoods too, but not at the cost of getting myself in hock at the rate of nearly 12X my income.

Sunday, March 16, 2008

Are property prices declining in Redondo Beach?

Ha ha, the $64,000,000 question. And unfortunately I do not have a definitive answer, though by some measures I believe they are.

I and some of the regular readers of this blog have spoken of the desire for something like a Case-Shiller Index for more local areas. And I've posted numerous times about the problems of collecting good data to build such an index.

Today I ran a piece of code against my database to look at recent sales of individual properties, and compare the sale of each property against its own prior sale.

As I feared, there is much in the way of wacky data in the results. My sales table is full of records that at one time were sales recorded in Zillow and now have mysteriously disappeared. So someday when I have time I need to go through and do deletions.

It can also be difficult to recognize a plain-vanilla short sale from a major financial distress sale where some industry vulture swoops in and scoops up a property for cheap and flips it for a huge profit. So after I came up with a list, I went through and deleted any result that didn't look like a normal transaction.

How do I recognize a "normal" transaction? Well I used Zillow for help there, because it is now tagging sales that look like anomalies - those that aren't full-value, arms-length sales.

Here is what I was left with after tossing out a lot of wacky stuff. This is pure short sale and flat sale. When I calculate the average return, it comes to about -3.9%.

             PRIOR     CHG    ADDRESS                    SQFT
2008-02-18 2004-05-19  -2.0   Pearl Street                750
2008-02-18 2005-08-12  -3.0   Carlsbad Street            1064
2008-02-08 2004-08-06 -14.0   Voorhees Avenue B          2613
2008-02-01 2005-03-31  -3.0   Beryl Street               1741
2007-12-27 2005-08-15  -2.0   Pullman Lane B             2446
2007-12-21 2005-08-15  -4.0   Mathews Avenue A           1523
2007-12-10 2005-08-12 -15.0   The Village 506            1285
2007-12-10 2007-06-15  -8.0   Vanderbilt Lane 2          1728
2007-11-20 2006-05-15  -3.0   Ruhland Avenue B           1859
2007-10-30 2005-06-15  -6.0   Havemeyer Lane             1854
2007-10-23 2006-05-15  -9.0   Fisk Lane                   914
2007-10-19 2004-12-01  -1.0   Bataan Road A              2287
2007-10-03 2006-03-15  -6.0   Camino Real 402             901
2007-09-21 2005-06-09  -8.0   Ruhland:Avenue B           2320
2007-09-07 2006-06-15  -2.0   Voorhees Avenue C          1636
2007-08-31 2007-06-15  -2.0   Grant Avenue C             1915
2007-08-29 2004-07-15  -2.0   Felton Lane                 762
2007-08-24 2005-12-15   0.0   S. Pacific Coast Highway 4 1836
2007-08-09 2005-07-15  -1.0   Nelson:Avenue A            2443
2007-08-07 2005-10-15 -11.0   Mcbain Avenue              1057
2007-08-02 2005-07-15  -5.0   Rindge Lane A              2420
2007-08-02 2005-12-19  -5.0   Clark Lane A               2261
2007-08-02 2007-05-07  -4.0   S. Catalina Avenue B       2107
2007-08-01 2005-06-15   0.0   Rindge Lane B              2456
2007-07-12 2005-04-15   0.0   El Redondo Avenue          1039
2007-07-06 2007-05-31  -4.0   Esplanade 511               719
2007-06-21 2006-04-28  -4.0   Armour Lane                 914
2007-06-04 2006-04-19  -3.0   Gates Avenue B             2316
2007-03-22 2007-02-27   0.0   The Village 505            1800
2007-03-09 2006-04-24  -4.0   Bataan Road A              2521
2007-03-09 2005-10-15  -7.0   Ruhland Avenue 13          1434
2007-03-08 2005-10-15   0.0   Vanderbilt Lane B          1793
2007-03-08 2007-03-01   0.0   Haynes Lane                 789
2007-03-07 2005-11-15  -2.0   Perkins Lane               1645
2007-02-21 2005-06-15  -2.0   Vanderbilt Lane C          1623
2007-01-19 2005-01-15  -1.0   Robinson Street            1224

What leaps out at me on this list is that no prior sale occurred before 2004. So far, owners who bought in 2003 and earlier appear "safe" in that they can be more flexible in their asking prices should they decide to sell their properties, since there is "bubble equity" in their homes.

There are many problems with my list and calculation, of course. One is that I don't measure the volume of short and flat sales relative to the entire group of sales that occurred over the time range that these short sales occurred. So I have not compared the short sales to the remaining sales, which are still profitable to the sellers. There were hundreds of sales last year that were profitable to their sellers, so a list of short sales does not necessarily spell disaster. However DataQuick has noted that for the region as a whole, far more foreclosures are now making up the pool of home sales than just a year ago. Presumably, more "financial distress" sales are also in that pool of homes sold, though DataQuick has not specifically reported on short sales relative to all sales.

Another issue is that if we just want to see how much profit is being made by selling, my code does not consider the cost of selling. So when you consider closing transaction costs, commissions to realtors, etc, even a flat sale is really a loss. And there are probably many properties sold that closed slightly higher than the prior sale on the same property, so it shows up as a gain, but when you consider the closing costs, it becomes flat or a loss.

And then there are the cases where a sale closes showing a gain, but the owner has been using the house as an ATM, pulling out equity, and when the transaction closes the owner has little left to show for it. There is no way of detecting those transactions.

If I go to Zillow and pull up a chart for a Redondo Beach house, then check the "Redondo Beach" box, so that Redondo Beach as a whole is shown on the graph, then you will see a dip in the RB line starting from the very tail end of 2005 at about $820K, a gentle slope down to about $765K in June 2007, then a slight ascent and leveling off into 2008, at about $790K. Zillow shows the the 2004-2005 price range as increasing between about $640K and $740K, which is well below the current price level of about $790K. My short/flat sale list is telling me that some sellers who bought in 2004 are taking losses, which suggests that prices could be back at 2004-2005 levels, which conflicts with what Zillow shows.

Here is Zillow's current opinion on Redondo Beach.

But everything since Fall 2007 has been occurring with shrinking sales volume. If and when we get more sales this spring, this might get easier to clarify.

I have been anticipating a drop in median price should sales volume pick up and buyers reenter the market at the lower end. Will it happen? Will prices fall back to 2004-2005 levels? Stay tuned!

Housing bears are stoooopid - it must be spring. That's when the flame mail comes!

This happened last spring too. Well, it's almost spring. This is getting predictable. Last year it was from a realtor. There was another one from a person whom I believe bought at Centex Fusion and felt a need to justify the purchase.

This year it's from a guy who claims he was a former math/science teacher and he is now a wealthy real estate mogul, but the funny thing is, for a math/science teacher he doesn't seem to be able to operate a computer very well. Either that, or he has what amounts to a compulsion to tell the housing bears what idiots they are. He posted the same comment three times. Anyway, here are his comments.

And by the way, Mario buddy, am I supposed to be impressed by your toys? You don't have anything that I would want...

Post #1 Mar 16, 2008 12:38 AM

Mario has left a new comment on your post "Preliminary look at February 2008 Redondo Beach sa...":

All the doomsayers and psuedo-intellectuals pretending they can PREDICT what will 
happen in the real estate market. I used to be a school teacher (Science/Math), Four 
years ago bought eight properties (some with sub-prime loans). I purchased mainly 
rentals units. Today I am no longer a school teacher, but retired at 49, living in a 
Beach House with a corvette and mercedes SL paid off cash. Boy, I am glad I didn't 
listen to all the "know-it-alls". I wasn't afraid to take a the 
doomsayer.. lol... golf anyone? (oh that's right, you have to go to work because you 
know so much about real estate. You know, as a rule most real estate doubles every 
ten years..when I am sixty...I should be worth keep telling us how smart 
you are so I can continue laughing....... 

Post #2 Mar 16, 2008 12:40 AM

Mario has left a new comment on your post "Preliminary look at February 2008 Redondo Beach sa..."

All the doomsayers and psuedo-intellectuals pretending they can PREDICT what will 
happen in the real estate market. I used to be a school teacher (Science/Math), Four 
years ago bought eight properties (some with sub-prime loans). I purchased mainly 
rentals units. Today I am no longer a school teacher, but retired at 49, living in a 
Beach House with a corvette and mercedes SL paid off cash. Boy, I am glad I didn't 
listen to all the "know-it-alls". I wasn't afraid to take a the 
doomsayer.. lol... golf anyone? (oh that's right, you have to go to work because you 
know so much about real estate. You know, as a rule most real estate doubles every 
ten years..when I am sixty...I should be worth keep telling us how smart 
you are so I can continue laughing....... 

Post #3 Mar 16, 2008 12:53 AM

Mario has left a new comment on your post "Preliminary look at February 2008 Redondo Beach sa...":

Darn I am glad I didn't listen to all the doom and gloom pseudo-intellectuals on real
estate. I purchased eight properties within the last four years. I presently collect 
30K a month in rents (I don't care what value the properties are or if they go down 
to zero dollars) All I know is that I listened to know-it-all's (most don't own more 
than one property). I would still be a school teacher The definition of having money 
to me is not having to take any s..t off people, not the amount. Today I drive nice 
cars (paid off) take great vacations and don't have to work if I choose not 

Saturday, March 15, 2008

Los Angeles Beach Cities Resale Activity for February 2008

Wow. I just studied this March 14 L.A. Times article by Peter Y. Hong in more detail. Get this:

Southern California home prices are now 19% below their peak last year. Home values also plunged 19% during the last real estate bust, but that was over a six-year period ending in 1997. Prices have now fallen just as much in less than a year.

Let me repeat that:

Southern California home prices are now 19% below their peak last year. Home values also plunged 19% during the last real estate bust, but that was over a six-year period ending in 1997. Prices have now fallen just as much in less than a year.

What else does this article say? One-third of Southern California homes sold in February had been foreclosed since January 2007. For February 2007, the proportion was 3.5% over the comparable period.

The experts are "surprised" at the decline. Why? We've already achieved declines that surpassed their predictions from last year. Michael Carney of Cal Poly Pomona, who predicted a minimum 15% decline last year, notes, "We don't appear to be leveling out." Delores Conway at USC last year predicted a 15% decline but now states, "...that's not to say we won't see 30%." Chris Thornberg, formerly at UCLA, and now at Beacon Economics, has doubled his forecast to 40%, noting "It's the speed of the decline."

According to DataQuick, Southern California home prices multiplied 3 1/2 times between 1997 and 2007. Tom Davidoff of UC Berkeley thinks it could take a while for prices to fall because of the long run-up. He believes that even the affluent areas would "eventually feel the pain as well." He notes that in the affluent areas, where prices have held up better generally, long-time homeowners haven't been under financial pressure to sell, so they are sitting and waiting for the market to turn around before trying to sell. Eventually, more homeowners from these areas will get tired of deferring their retirement or moving plans, and they will have to sell.

Edward Leamer at UCLA thinks the region's price decline could be overstated because relatively few high-end homes are listed or sold. Dataquick's numbers are currently heavily weighted toward the lower-end, especially with foreclosures. Leamer thinks that the Case-Shiller index gives a better picture, which excludes new construction and only compares a home's sale to its previous sale. By Case-Shiller, prices are 15% below their peak.

Are you starting to understand why I am such a grizzly bear and why I think we could see 70-95% declines from the peak over the coming years?

Yes it sounds crazy, I know. But this real estate tail has been wagging the economic dog, and the labor market is finally now starting to show some signs of stress. If the employment rug gets pulled out from beneath us, it'll be all over. If that does indeed happen, I would expect the decline to accelerate substantially and perhaps it will be mercifully quick, instead of grinding us down over a period of several years. I honestly don't know which would be better.

This downturn is orders of magnitude greater in size and scope than the last downturn. So if I can manage to retain full employment, with little or no reduction in income, and my savings and investments don't evaporate into thin air, I will figure I am doing pretty darn good.

To quibble over whether we actually have a 15% decline or 19% decline in home values reminds me of clipping the toenails on the body and ignoring the blood pouring out of the bullet holes.

Long-time readers know that with the exception of the charts for all of Los Angeles County, I place little value in the rest of the charts below, due to the low sales volume that generates them. Nevertheless this is all we have to go on. Remember these are sales of EXISTING homes.

Here are the detailed RESALE statistics for the beach cities and some of the surrounding zip codes (prices are in 1000's):

                         SFR   MEDIAN    %YOY    CONDO  MEDIAN   %YOY  
LA/Westchester    90045   12    $728     -4.3%     1     $380   -16.5% 
El Segundo        90245    4    $773     -9.6%     5     $539   -14.4%
Hawthorne         90250   19    $513     -6.8%   N/A      N/A      N/A  
Hermosa Beach     90254    9  $1,255    +32.2%     6     $903    +1.0%  
Lawndale          90260    7    $370    -30.8%     1     $500    -9.8%  
Manhattan Beach   90266   13  $1,723     -6.9%     1   $1,215    +9.8%  
Palos Verdes Pen. 90274   13  $1,300     +2.0%     2     $261   -45.8%  
Rancho P.V.       90275   22  $1,108     +3.3%     2     $482    -3.6%   
Redondo Beach     90277   12  $1,078     +7.9%     7     $810    +7.6%   
Redondo Beach     90278    8    $645    -12.8%    13     $640    -6.5%

And let's pay special attention to what one former homeowner said of her recent experience getting out from her home at a loss:

We had no business buying that house, but everybody was buying a house, and the loans were there. Don't get caught in the hype. It bit me hard.

Thursday, March 13, 2008

DQNews: Southland home sales still ultra-low; median price slips again

Southern California home sales are still falling, according to this March 13 story by DQNews. It was likely the slowest February DataQuick has ever tallied, and it was the second lowest for any month DataQuick has tallied. The 10,777 sales (both new and existing) for February was +8% from January but -39% from the 17,680 sold in February 2007.

The median sale price for the six-county region of Southern California is -17.6% YOY.

Of the homes that sold, one-third of them (33.5%) were homes that had been foreclosed since January 2007. In February 2007 the number of homes sold that had been foreclosed in the prior year period was only 3.5%.

DataQuick analysts commented that while they aren't surprised by the heavy foreclosures in places like the Inland Empire, where prices bubbled up from wacky loans, they are "anxious" about more established neighborhoods like the coastal areas, and whether the higher conforming loan limits will boost sales this spring and summer.

The median price for the Southland in February was $408,000, -19.2% from the $505,000 peak in the summer of 2007. There has been a substantial shift in the types of homes selling and a huge drop in sales of expensive homes financed with jumbo loans. Jumbo mortgages were about 17% of the Southland's home sale transactions for February, compared with 39% in February 2007.

The median monthly mortgage payment committed to in January is $1,821, down from $1,889 in January, and down from $2,203 in February 2007. It is -28% from the peak in June 2006. Adjusted for inflation, the monthly mortgage payment is actually -18.0% from spring 1989.

DataQuick reports that foreclosures continue to be pegged at record levels, ARM financing has fallen to a six-year low, and non-owner occupied housing activity is increasing.

County         # sold  # sold   % chg    med       med      % chg
                 2007    2008            Feb 07    Feb 08
Los Angeles     6,300   3,468   -45.0%  $528,000  $460,000  -12.9%
Orange          2,449   1,471   -39.9%  $620,000  $520,000  -16.1%
Riverside       3,057   2,147   -29.8%  $410,000  $325,000  -20.7%
San Bernardino  2,274   1,242   -45.4%  $368,750  $290,000  -21.4%
San Diego       2,863   1,954   -31.7%  $480,000  $415,000  -13.5%
Ventura           737     495   -32.8%  $584,000  $445,000  -23.8%
SoCal          17,680  10,777   -39.0%  $495,000  $408,000  -17.6%

Peter Y. Hong, in the March 13 L.A. Times story "Southern California home prices still dropping at record rate", reports the same information. He notes that home prices are "now at 2004 levels."

The rapid pace of the decline has compelled economist Christopher Thornberg to revise his previous estimate of a 20% decline to a 40% decline. Edward Leamer at UCLA has predicted a 20-25% decline from the peak. For comparison, the median Southern California decline from 1991 to 1997 was 19%.

I'll give Thornberg credit for updating his forecast, but personally I am and have been much more bearish than he is. If there is any kind of massive paradigm shift in the herd thinking of the house buying crowd, in terms of what constitutes good value in a home, these mega bubble builders and the owners of some of these mega bubbles may be in deep trouble. What somebody paid for a bloataminium is not some permanent price guarantee backed by the full faith and credit of the government. Value is a very fuzzy vague notion that gets fired off on synapses in our brains, and when people collectively change their minds about what is good value - look out below!

Anecdotally, I know people are fed up and leaving the area. My former coworker, who moved his family up to Oregon, told me a few weeks ago that he persuaded his sister and her husband to leave the Silverlake area and come up to Oregon and live near them. Sister works at Yahoo and was able to transfer to an Oregon office. An acquaintance on a bear board ran U-Haul estimates for what it would take to rent a 26-foot truck from Sacramento to Portland. That was $848. To go the other way, from Portland to Sacramento, was only $286. Interesting!

Wednesday, March 12, 2008

Daily Breeze: Developers put Hawthorne housing construction on hold

I got a wonderful heads-up from a regular blog reader (I get the greatest tips from my blog readers!) about this March 10, 2008 Daily Breeze article by Sandy Mazza (link will probably expire). Those of you who aren't particularly thrilled with all the high-density housing projects in the area will appreciate it.

The slumping real estate market has brought Hawthorne's housing boom to a standstill,
interrupting plans for about 800 new luxury homes that were set to go up for sale
this year.

Three high-density housing developments have been derailed since last year, when the
nationwide subprime lending crisis spurred flocks of foreclosures and a decrease in
the value of homes.

Former Hawthorne Mayor Guy Hocker has canceled his plans to build about 100
single-family homes at the former Robert F. Kennedy Medical Center near 116th Street
and Grevillea Avenue.

Hocker, with a partner, bought the property about a year ago for $15 million. He
received City Council approval to build the Prestige Villas in September, but, months
later, he abandoned the project because of upheaval in the housing market. Hocker
said last week that he's trying to sell the eight-acre parcel.

At the newly built gated community called Threesixty at The South Bay, the developer
has stopped the sales of its 625 luxury condominiums on the site of the annexed
portion of the Los Angeles Air Force Base on El Segundo Boulevard.

On Monday, the development's Web site stated: "Sales opportunities are temporarily
unavailable while we give the market time to improve."

The homes went on the market in October at prices from the mid-$600,000s to nearly $1
million. But all sales were canceled, and selling stopped this year.

Mike McMillan, project manager for the developer William Lyons Homes, said the
company would not answer questions about its decision.  "As it relates to the
Three-sixty community, we're not really in a position to comment," he said.

A third planned housing development has also changed direction. South Bay Ford owner
Gary Premeaux said he's abandoned plans to build 164 homes at the former dealership
near Hawthorne Boulevard and Rosecrans Avenue.Premeaux said he will continue to
operate a fleet service center on the property until the market improves.  "I spent a
ton of money to get the entitlements approved, which I got," he said. "The subprime
housing problem is a cloud over everyone that's going to be around another 12
months."  Premeaux said his proposed project would have garnered about $1 million
each year in city taxes, because it's in a redevelopment area.

City Manager Jag Pathirana said the loss of these housing developments will cause a
budget shortfall for the city.  "It is unfortunate that these projects have been
temporarily halted, but this is to be expected in the current housing market,"
Pathirana said, indicating that he expects the developments to move forward when the
market improves.  "The temporary stalling of the projects will hurt the city
financially. We were anticipating the property taxes and other ancillary
revenues from those developments."

The Office of Federal Housing Enterprise Oversight states that the downward trend of
the housing market in 2007 represented the longest sustained decline since 1991.

The housing market reflects an overall economic slowing nationwide, according to the
National Association for Business Economics, which predicted that the economy will
begin to improve in the second half of this year.

However, some projects in Hawthorne are moving forward. Fusion at South Bay, a
project comprising 280 condominiums near Aviation Boulevard and Marine Avenue, is
nearly sold out, according to its advertisements. Representatives from Centex Homes,
the project's developer, did not return phone calls and e-mails last week regarding
the project. A banner outside the development lists home prices beginning at
$300,000, while they initially were advertised at $520,000.

Meanwhile, some have capitalized on the decline in the cost of housing and a drop in
mortgage rates.

Jeff Lee, owner of Lee Homes, said his planned Central Park development is going
full-speed ahead. The project, which should hit the market at the end of this year,
will bring 176 detached single-family homes near the corner of 120th Street and Van
Ness Avenue. "We've got 1,000 people on our interest list," Lee said of the homes
that will range from mid-$500,000s to mid-$600,000s. "We're in the housing business.
Yes, it's tough. But all of our homes will be covered by better loans at lower
interest rates. We're happy."

In the years leading up to this mess (2005, 2006) I can't recall a single industry observer being quoted as saying that things were going to take a tumble. Look how long it's taken any industry observers to admit that things are not so good. Now they're acting like it's just a little temporary rain and it'll all blow over and sunny weather is just around the corner! They still aren't facing up to the possibility that this debacle could really drag us down into the pits of hell.

If I am going to make one prediction, it'll be this - there won't be any kind of lasting and sustainable recovery until these industry experts are pouring blood and tears all over the newspapers and agonizing over how their businesses have been destroyed or nearly so, and how there is no way in hell they see any recovery on the horizon.

And as for that "interest list" that the Lee Homes builder has, well 360 at South Bay had a good interest list too. Did that interest list translate into committed buyers? Or did the people on this interest list have a different sort of interest, if you get my drift from the picture below?

And why is it that these builders who build these bloated mega-developments and disrupt the lives of the local residents are not obligated to comment on what they plan to do with the properties, which are now eyesores?

Monday, March 10, 2008

California housing bears, it's March 2008. How's your local bank these days?

Federal Reserve chairman Ben Bernanke has plainly admitted that some small banks will fail this year, and already there are signs of strain. The FDIC is flagging banks as "troubled". We've been warned.

Years ago, Martin Weiss provided what I believed to be by far the best independent bank safety ratings. Most other rating agencies have historically been a day late and a dollar short, but not Weiss, he was out in front marking down financial institutions when he saw danger, at times standing up to nasty threats from the demoted institutions. I was heartbroken when Weiss Ratings was sold to Weiss grew up learning the business at his father Irving's knee, and has probably forgotten more about the banking industry than most of us will ever know. To me his name meant something on those ratings, whereas just doesn't have that impact.

I don't know if the staff of Martin Weiss advises TheStreet, but I'll assume for a moment they are still the same trustworthy reliable ratings.

You don't know how badly I soooo wanted to post a list of all the banks in California and their ratings. But I don't want to be accused of starting a bank run, so what I will do is post a list of the banks with A+, A, and A- ratings, and let you pursue this further if you don't like what you see. Note - I have better luck running the screener in Internet Explorer.

 America California Bank, San Francisco  A 
 American Security Bank, Santa Ana  A- 
 Bank of Stockton, Stockton  A- 
 Bank of The Sierra, Porterville  A- 
 Bank of Willits, Willits  A+ 
 California First National Bank, Irvine  A 
 California Pacific Bank, San Francisco  A 
 Chinatrust Bank USA, Torrance  A- 
 City National, Beverly Hills  A- 
 CommerceWest Bank , Newport Beach A- 
 Community Bank, Pasadena  A- 
 Community Bank, Santa Maria  A- 
 Community Bank, Stockton  A- 
 Delta National Bank, Manteca  A 
 Deutsche Bank Natl Trust Co, Los Angeles  A- 
 Downey Savings & Loan, Newport Beach  A- 
 El Dorado Savings Bank, Placerville  A- 
 Exchange Bank, Santa Rosa  A- 
 Farmers & Merchants Bank, Lodi  A- 
 Farmers & Merchants Bank, Long Beach  A+  
 First Commercial Bank, Alhambra  A- 
 First Federal, Santa Monica  A- 
 First Federal, San Rafael  A- 
 First Regional, Los Angeles  A- 
 First Security, Orange  A+ 
 Gilmore Bank, Los Angeles  A- 
 Greater Bay Bank, Palo Alto  A- 
 Heritage Bank, San Jose  A 
 International City Bank, Long Beach  A- 
 Los Angeles National, Buena Park  A- 
 Manufacturers Bank, Los Angeles  A- 
 Mechanics Bank, Richmond  A- 
 Merchants Bank, Carson  A- 
 Mission Oaks National, Temecula  A 
 Nara Bank, Los Angeles  A- 
 Oceanic Bank, San Francisco  A 
 Omni Bank, Alhambra  A- 
 Orange Community Bank, Orange  A- 
 Preferred Bank, Los Angeles  A- 
 Premier Valley Bank, Fresno  A- 
 River City Bank, Sacramento  A 
 San Luis Trust Bank, San Luis Obispo  A 
 Savings Bank, Ukiah  A 
 Silicon Valley Bank, Santa Clara  A 
 Stockmans Bank, Elk Grove  A 
 Summit Bank, Oakland  A- 
 TomatoBank, Los Angeles  A- 
 Valley Business Bank, Visalia  A- 
 Valley Community Bank, Pleasanton  A- 

Remember, just because a bank isn't an A bank doesn't mean that it is guaranteed to fail, and an A bank isn't guaranteed to remain an A bank. Although I have one "lifer" A+ bank, my other bank was A- for many years, and has now been B- for a while. I have to make a decision about moving money out of it.

Another service that provides bank ratings is Veribanc.

L.A. Business Journal: Median Home Price Falls, Sales Slow in February

According to the story by Deborah Crowe in the March 10-16 edition of the L.A. Business Journal (I cannot link to it, unfortunately), the median home price in L.A. County dropped to $468,000 in February. I incorrectly surmised last month that this figure was SFRs and condos combined, but I believe it is just SFRs. For SFRs, this is -14.9% from February 2007, -6% from January 2008, and -20% from the May 2007 peak of $585,000. According to Home Data, the data provider, 2,046 homes were sold in L.A. County in February, -44.1% from February 2007.

The condo market is also getting whacked, though not as badly. The median condo price for L.A. County was $400,000 in February -6.1% from February 2007. Condo sales are -44.4% YOY.

And what are the industry observers in the trenches reporting? Connie de Groot, a realtor in Beverly Hills, tells us that buyers want to know how desperate sellers are. And the second trend she is observing is that buyers think they "want" foreclosures - until they see what shape those foreclosures are actually in. Her feeling is that sellers have to be very "committed" to the selling process. Her colleagues think stabilization is at least 6 months away.

Even in the highly desirable affluent areas, home sellers are downwardly adjusting their expectations from the boom highs - however sales volume in such areas has generally held up and even increased in some of those areas. De Groot notes that the "picture perfect" homes are selling quickly, but anything that's going to need work isn't moving. "Last year people were excited about a fixer-upper. Now they're scared to spend money."

Garamond Lee, a real estate broker in Rancho Palos Verdes who recently listed his own hillside home for less than its appraised value 2 years ago, notes, "I think the speed at which the market has unraveled has surprised many of us." He thinks the key to successful selling has been to lower initial asking prices once the impact of last summer's credit implosion clarified the situation. He also believes sellers and buyers have to be "creative", and cites one deal in which the buyer put nearly 50% down, thus needing only a traditional conforming loan, not a jumbo. Lee is also doing lease option arrangements, where potential buyers can rent the home with the option to buy it later at a certain price. He notes, "There are a lot of people who want to buy, but they just don't have the credit score or the down payment. In this market, I can buy a home at a good price, lock in a sales price to the new buyer that's still below where the appraisals would come in, and carry the property for a while as they make payments to me. Everyone's happy."

Stuart Gabriel at the Ziman Center for Real Estate at UCLA argues that it is in "everyone's own self-interest" to "shore up the leaks in the dam. Do you want foreclosure signs in your neighborhood driving down the value of your own home?"

-------------------------- SFR ----------------------------------
COMMUNITY          ZIP    Feb     %YOY        Feb    %YOY
                          Sales   Change      Price   Change
El Segundo       90245      5    +400.0%  $1,200,000  +23.7%
Hermosa Beach    90254      9    +125.0%  $1,255,000   -2.6%  
Manhattan Beach  90266      9     -52.6%  $1,575,000  -12.5%  
Redondo Beach    90277      4     -60.0%  $1,005,000  -10.9%
Redondo Beach    90278     10     -54.5%    $758,000   +2.7%

------------------------ CONDO ----------------------------------
COMMUNITY          ZIP    Feb     %YOY       Feb       %YOY
                          Sales   Change    Price     Change
El Segundo       90245     0       N/A         N/A      N/A (3 sales in 07, $630K)
Hermosa Beach    90254     1     -50.0%    $815,000   -11.6%
Manhattan Beach  90266     0       N/A  $      N/A      N/A (2 sales in 07, $746K) 
Redondo Beach    90277     3     -62.5%    $799,000   +11.3%
Redondo Beach    90278    10     -41.2%    $600,000   -18.9%

I will now list the zip codes with the most expensive homes and condos, and the zip codes showing the greatest price losses. However always keep in mind that these transactions occurred on very low sales volume, so these figures do not say anything about the unsold inventory sitting in these same areas. YOY comparisons may be comparing apples to oranges if comparable property sales are not matched.

The most expensive homes (SFRs) in February were in Laurel Canyon 90046 (+108.3% YOY), Pacific Palisades 90272 (+27.2%), Brentwood 90049 (-0.8%), West Hollywood 90069 (+52.6%), Manhattan Beach 90266 (-12.5%), Venice 90291 (+56.4%), Palos Verdes Estates 90274 (+11.7%), Rancho Palos Verdes 90275 (+35.6%), and La Canada 91011 (+9.2%).

The most expensive condos were in South Park 90015 (+21.5%), Santa Monica 90404 (-34.9%), Brentwood 90049 (+10.8%), Westwood 90024 (-2.6%), Playa Vista (YOY N/A, current median condo price $624K), Redondo Beach 90278 (-18.9%), West Los Angeles 90025 (-12.9%), Laurel Canyon 90046 (+43.0%), Koreatown 90005 (-2.4%), and West Hollywood 90069 (-3.5%).

The areas with the greatest home (SFR) price losses for February were Cerritos 90703 (-46.2%), Woodland Hills 91364 (-39.3%), Acton 93510 (-35.5%), Panorama City 91402 (-35.3%), Palmdale 93550 (-35.2%), Pacoima 91331 (-35.0%), Van Nuys 91405 (-33.8%), Woodland Hills 91367 (-33.6%), Agoura Hills 91301 (-32.2%), and Downey 90240 (-31.7%).

The areas with the greatest condo price losses for February were Westlake Vililage 91362 (-57.1%), Santa Monica 90404 (-34.9%), North Hollywood 91602 (-33.6%), Sylmar 91342 (-33.3%), Glendale 91202 (-33.1%), Monterey Park 91755 (-32.6%), Canoga Park 91304 (-31.0%), Arcadia 91006 (-31.0%), Newhall 91321 (-28.8%), and Hawthorne 90250 (-28.1%).

If you've been reading this blog for a while you'll know that I consider this kind of data practically useless for the average Joes and Jills trying to sell their homes and figure out if prices are going up or down. Each zip code is like a little straw poll. Taken together, they may have some weight, and the county figures overall have merit. But in so many cases, what was a hot sale last year may be avoided like the plague this year so we don't know from these numbers if we're truly comparing sales on the same types of properties.

It's hard to believe that the county SFR peak of $585,000 was less than one short year ago. Take away the credit cocaine, and this is what happens.

And while I admire some of the "creativity" spoken of in this article, I wonder if brokers are going to be able to continue to carry such deals should the market continue to spiral downward.

In the meantime, I still expect falling knife shoppers to come out of the woodwork this spring. It's part of the correction process.

Friday, March 07, 2008

Preliminary look at February 2008 Redondo Beach sales

I am still scraping sale data out of the Manhattan Beach Reporter. Zillow is starting to get a little more usable so maybe somebody there is finally doing something to improve their website. MBR does not give exact sale dates so my estimates continue to fall on the first day of the reporting period.

I can't really draw major conclusions yet from such sparse sale data, but the drops in February are interesting. There were almost no well-heeled buyers (the kind who can just write a check) closing a sale in February, if this data is of any value.

It's obvious how credit has been the lifeblood of our economy, isn't it? Never mind that it caused all kinds of value dislocations to begin with, but when it's taken away the credit junkies squeal bloody murder.

STAT     AUG 2007   SEP 2007   OCT 2007  NOV  2007   DEC 2007   JAN 2008    FEB 2008
records        51         68         44         37         26         25          25
MEDIAN   $850,000   $857,000   $755,000   $832,500   $782,500   $795,000    $755,000   
AVERAGE  $867,925   $935,506   $770,416   $933,956   $832,827   $932,117    $831,500
MIN      $365,000   $369,900   $369,900   $379,000   $486,500   $449,900    $520,000
MAX    $1,510,000 $2,400,000 $2,560,000 $2,500,000 $1,500,000 $2,130,000  $1,590,000

For February 2007, I had 64 sale records, median was $745,358, average was $787,799, min was $387,500, and max was $1,878,000. The difference between 64 sales and 25 sales is the collapse of a market which was already teetering a year ago. That's the only thing we can be certain of. Median price is practically flat YOY.

I found it interesting that concomitant with the drop in prices there has been a rise in median square footage in the homes sold. That would indicate to me that real estate dollars are stretching further to buy more real estate, but at these still-insane prices, that means nothing. The value isn't really there yet by a long shot.

Part of the reason we've seen DOM rising over the last month or two is due to seasonal slowness. But take note - the time spent hustling the homes sold in February was a median 4 months (119 days).

The median reduction from original asking price dropped slightly from last month, down to 8.7% from 9.5%. On its own, this measurement doesn't necessarily mean anything but has to be taken in context with everything else. Reductions are up considerably from the reductions of, say, a year ago, and I am seeing reductions every day on Zip Realty - and trying to log them all! There are more of the 5%-10% and fewer of the frivolous $10,000 at a time reductions. When PCTRED shrinks, that would indicate to me that sellers are getting better at realistically pricing their homes, but if prices continue to spiral down, I would expect PCTRED to expand again, waiting for sellers to catch up to the market.

The Office of Federal Housing Enterprise Oversight (OFHEO) has put out new conforming loan limits. You can read them in this PDF file. It looks like Los Angeles has been maxed out at $729,500 for a single home unit, which is going to shoehorn in a lot of listed Redondo Beach properties that would not have otherwise been eligible.

One thing I am fairly certain of is that there is no shortage of wannabe homebuyers shopping for falling knives. So if the new limits resuscitate this market, expect some sales that would otherwise have occurred by now to get pushed forward into late March, April, and May.

By the way, if the February sales listed in MBR are accurate, it looks like three of the six properties at Mansel Villas have been sold. I have not blogged about them because I have been unable to find a website for them. Those units have been close competitors to the Ruxton Lane development (just search this blog), which have all seen some price slashing in recent weeks.

Sunday, March 02, 2008

More pack-em-in housing - this time apartments

You've probably seen these to your right as you go southbound on the 405, just before the El Segundo offramp. The Pac Place Apartments are built right next to the LAX County Courthouse.

I feel it is my duty as a housing bubble blogger to be on the interest lists of new housing developments in the area. So I signed up, and this is what I found out.

Studio apartments START at $1395 a month.

One bedrooms START at $1715 a month.

Two bedrooms START at $2315 a month.

Three bedrooms START at $3010 a month.

All this, in what I would consider a somewhat marginal area. In the Del Aire community there are a lot of tech types that have worked in local high tech and aerospace. That crowd is is one of the better features of this area, in my opinion, keeping it afloat.

In spite of Pac Place's claim that their "apartments are leasing quickly" I find these rentals outrageous.

If you think that's crazy, wait'll you see the pack-em-in housing in Westwood. The Palazzo in Westwood on Weyburn, right next to my work, where a lovely Thursday afternoon farmers market used to be, before stupid greedy Los Angeles city council members threw it out so these bloatpartments could be constructed.

Since the monthly prices are listed on the website, I won't list them all, except the following:

1 bed 1 bath, 750 sqft apartments START at $3190 a month.

Plan C townhouse apartments, 3 bed 3 bath, START at $7,400 a month.

When I first heard about this development I was originally told they would be condos, but maybe there has been a change in plan due to the housing market slowdown.

You can check out the websites of both developments for the lists of amenities, which include pools, spas, gyms, exercise rooms, blah blah blah.

These asking prices on rentals are almost making the housing market sound good! Personally, I think the same market forces that have been dragging down housing will eventually work its way over to rentals.