Tuesday, May 27, 2008

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

Shorewood has published its April statistics.

According to the realty firm, the average April DOM for sales in the four beach cities was 69, which is the highest DOM for April since I've started keeping track of Shorewood's DOM numbers back to July 2004. Again, DOM is showing an unusual pattern. During the spring, it normally dips, and that's not really happening. Yet Shorewood doesn't really discuss it.

My calculation of average DOM for just Redondo Beach in April came in at 152 days, which is about 5 months.

Now let's look at Supply Strength (Demand Weakness). It is coming down. Now look at the last time it came down in a big way. We have to keep in mind that for this chart I use Shorewood's own official numbers, not my own estimates. Last year when the official inventory count shrank, that didn't exactly lead to a booming recovery, did it? So I wouldn't interpret any decline yet as a sign of a recovery. We are a long way from that.

Shorewood probably defines *inventory* as whatever is currently listed. When inventory shrinks, Shorewood calls that *good*. I, on the other hand, am assuming we are in one hellacious downturn. So when I see inventory drop, I build another assumption upon my bear market assumption - inventory dropped because home sellers who didn't sell their homes and didn't relist have set aside the idea of selling their homes. They have exited the stage, relegated to the roles of understudies. In other words, there are frustrated wannabe sellers out there who aren't even listing their houses right now because of market conditions.

What evidence do I have that my assumptions could have merit? Well, of the 185 listings I currently have in my database of properties that were either listed or marked down in May (this month), some 28% were originally listed five months ago or longer. Of all the 1000+ unresolved records in my database (not just the ones that are newly listed or price-reduced in May), some 10% of them were first listed in 2006. Another 17% were listed from the beginning of last year up until a year ago (late May).

Even if, say, 25% of the 1000+ unresolved records in my database were resolved, that would still put my database showing some 40% more inventory than what is currently listed in Zip Realty.

Anyway, back to inventory versus sales. It's been coming down. I don't anticipate inventory to sales getting tight like it did around March 2007, and certainly not tight like it did in the late spring of 2005. We'll see.

Now, beach cities median price. It actually moved up, by some 9.1%, to $1,050,000. The price pattern is quite jagged. Even though the median price was up from March, it is still below the peaks reached in September 2007 and January 2008.

I don't know if I've explained before, but I am starting to wonder if there could be some manipulation in the sales figures. Units at Breakwater have been selling. These are lower end senior condos. The sales of these would pull down the median price in Redondo Beach even more than its been showing. Some local realtors even pointed that out in an article in March. I cannot find sales records recorded either in the local papers or in Zillow. The only reason I know about any sales at all is because Zip Realty shows about 35 (out of 190+ units) sold. Neither square footage nor sales prices are recorded in Zip Realty, and as I've said they aren't recorded anywhere else at all yet.

It's difficult to tell whether Redondo Beach is exerting any gravitational pull downwards on the median price. This is one month, where, unusually, the Redondo Beach chart from DataQuick data and the beach cities chart differ in price direction.

Standard & Poors: Los Angeles area median housing price down -21.7% for March 2008

The Case-Shiller Index was released for March 2008.

According to the index, the Los Angeles area median home price was down -21.7% from March 2007, and down -3.6% from February 2008.

The entire Composite-20 metropolitan index was down -14.4% YOY for March.

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

The Los Angeles Times' Peter Hong's coverage is here.

Saturday, May 24, 2008

Daily Breeze: South Bay home prices still sliding

There isn't much additional new information here that you don't already know about, if you've been regularly reading the Los Angeles regional housing bubble blogs. But it does mention screwy statistics, it's a good supplement to my CAR/DQNews post for April and I want to capture it for posterity.

You can find the original story here - but the link may expire.

South Bay home prices still sliding
HOUSING: Carson dropped 25.9 percent since April '07. MB is 25.8 percent lower.
By Muhammed El-Hasan, Staff Writer
Article Launched: 05/23/2008 11:53:20 PM PDT

Home prices across the South Bay continued to slide in April, with every community 
cited in a report released Friday posting double-digit declines.

Carson was the area's biggest year-over-year loser, with a 25.9 percent drop in 
median home price to $389,000, according to a report by the Los Angeles-based 
California Association of Realtors.

Manhattan Beach experienced the second worst drop, of 25.8 percent, to $1,372,500.

The median price refers to the middle point where half of homes sold for more and 
half for less.

The South Bay, excluding the Palos Verdes Peninsula, saw a 12.8 percent drop last 
month, compared to a year earlier. That was still better than Los Angeles County, 
which suffered a home price decline of 19.6 percent to $435,000.

Redondo Beach had the area's mildest decline with an 11.9 percent drop to $695,000.

The South Bay is caught in a nationwide housing downturn that has hit California 
especially hard amid a severe credit crunch caused by lenders having issued mortgages 
to people who could not afford them. Lenders have since tightened their lending 
standards, which has led to limited credit available to home buyers and other 

"Part of the problem is that the lenders are sitting on some really tight approval 
criteria," said Realtor John Parsons, a Redondo Beach planning commissioner and 
former councilman. "Now they've gone too far the other way. It's hurting everyone, 
including lenders. Lenders don't make any money if they're not making loans."

The Palos Verdes Peninsula as a whole saw its median home price drop 8.5 percent to 
$1,075,000. However, individual cities on the Hill were not cited in the report 
because none reached a threshold of at least 30 sales for the month.

Other cities such as Lawndale, Lomita and Hermosa Beach also were not cited.

However, excluded cities' home sales are included in the regional median figures, 
such as those for the county, South Bay or Palos Verdes Peninsula.

In a statistical oddity, the South Bay's beach cities as a whole posted a home price 
gain of 2.5 percent to $1,025,000. The rise is attributed to a concentration of homes 
at the high end of the market being sold in a specific month to skew the median 

Statewide, Manhattan Beach was the second highest priced community in the CAR survey 
for April. Saratoga took the top spot.

April was the first time this year Manhattan Beach was even directly cited in the 
report because the city continually sold less than 30 homes a month.

Manhattan Beach's previous absence from the list is due to the slowdown in home sales 
and the beach city's relatively small size.

"Obviously, the smaller the population, the less properties you potentially have for 
sale, and that could create the scenario where you may not have enough sales taking 
place," said Parsons, of Horrell Realtors in Redondo Beach.

When the housing market finally recovers, Manhattan Beach will likely remain one of 
the state's highest-priced communities, Parsons said.

"It's still near the beach. It's still near LAX," Parsons said. "It still has all the 
things that made it attractive before."


Speaking of everyone - including lenders - getting hurt by this downturn, check out this Suze Orman show with a very cash-strapped realtor. I posted this because she is a Los Angeles area realtor. From $130K annual income to about $40K annual income, underwater by $50K, on some $600K of loans. This was uploaded November 2007 so can you imagine where things are at now?

Thursday, May 22, 2008

There may be more than just ocean waves crashing in Redondo Beach

Most of you are probably too young to remember the old Time Tunnel sci-fi series, about two scientists in Project Tic-Toc who get stuck in a time machine and travel into specific moments in history in which disasters (e.g., the Titanic) are about to unfold, and they try desperately to change the outcome but can't. You could call Dr. Tony Newman Cassandra-1 and Dr. Doug Phillips Cassandra-2.

Perhaps more relevant to you Gen-Xers and beyond is the novella The Sun Dog by Stephen King, in which a teenage boy discovers that although he snaps self-developing Polaroid shots of any subject matter he wants, the pictures always come out the same - a vicious black dog who gradually edges closer and closer toward the photographer with each successive picture taken.

It was bad enough to feel like a complete wacko for many many years watching this bubble blow up to such monstrous proportions and wondering if things would ever change. There is no question about it that housing bears have been Cassandras. The perennial housing bubble optimists have been carefully crafting their PR, snapping lots of rosy pictures, but once the pictures are developed that vicious black dog of a price decline just won't go away and keeps edging alarmingly closer as time goes on.

There is a possibility that Redondo Beach has finally hit that slippery slope of the S-curve. The markdowns are coming so fast and so furiously that I cannot keep up with them. The jig may be up. Today I spotted another round of markdowns at Ruxton Pacific. If you've been reading this blog regularly you know that I stopped by there two weekends ago and picked up literature, then last weekend at 6 PM on Sunday night I got a phone call from a realtor there. I told her honestly that we weren't looking to buy, and were keeping all our options open, including moving to another state and moving out of the country.

I think the Ruxton markdowns were triggered in part by the sale of the final unit at Mansel Villas, which originally went for about $800,000 (same as Ruxton Pacific) and finally sold for $650,000. Ruxton Pacific therefore has no choice but to mark down. The realtor is doing the right thing, and he's got to do it quick.

It's amazing to see what happens when the air is let out of a bubble. A few electrons leap about between synapses in home buyers' brains, and in a matter of seconds potential home buyers can alter their opinions about assuming a pile of mortgage debt the size of Mount Everest. It doesn't matter about the surround-sound or the granite countertops, how much debt am I taking on? And in the blink of an eye it suddenly doesn't matter that a brand new townhome that was originally marketed at $800,000 was reduced down to $720,000, with free 1 year HOA and coverage of closing costs thrown in. It was still too much debt to take on. So the townhomes are marked down further to $650,000. But if the potential mortgage debt is over what people feel comfortable taking on, the asking price might as well be $1 trillion. In the prior downturn, we reached a point where price markdowns became "a way of life" and lots of properties sat on the market for several years. We haven't quite gotten there yet because we haven't reached the "reductions as a way of life" stage yet. Nearly half the unresolved inventory in my database is not marked down.

It must be murder being a builder in an environment like this. Construction projects have long lead times and can't take into account how quickly people can change their minds about the perceived value of their product. Builders assume that what people wanted last year is what people will want next year. It's virtually impossible for a builder to change course in mid-stream as quickly as people can change their minds about what kind of housing they think they want and how much they are willing to load up on debt for it.

All is well!

You are going to hear a lot of hype about improving sales in Redondo Beach over the next few weeks, and that things will be rosy again soon. It is true that sales are bouncing up a bit. For Redondo they may even exceed my guesstimate of 60 properties sold for May. But the way I perceive the truth is that those sales are finally going to mark to market all those price reductions that have been quietly occurring over the fall and winter months, and the median price will fall. We need these sales for prices to fall.

I am going to sign off this post with a sneak preview of ultra-recent May home sales so you can see how prices have come down and how reductions have gone up, percentage-wise. Remember this is sort of a preview of a preview.

Saleprice  Sqft   PctRed    DOM
405000     1033   15.09     437
420000      955    8.70      91
461000      941    5.92     179
465000      949    2.11      62
517000      909   10.09     281
525000     1194    8.70      52
526000     1070    3.49      97
575000     1820   17.85     626
599000      972    9.92     138
620000     1819   17.32     173
625000     1162   26.27     417
650000     2000   18.65     286
678000     1707    7.00     233
683000     2208   14.63     261
725000     1824    6.93      73
735000     1482    0.00      41 
750000     1622   -0.13      65 
820000     2022    1.09      89 
829000     2019    0.00      34 
830000     2500   12.54     304 
850000     2263    9.48     176 
865000     1692    6.99      42 
868000     1826    0.80      82 
875000     2500    2.67      66 
890000     2500    8.15     122 
980000     2230    1.90      89 
1140000    2320    7.24     250 
1285000    1428    6.07     200 

704000    1763    7.12     130 MEDIAN
721107    1677    8.20     177 AVERAGE

And short sales continue to occur. If I loosened up my short sale query and considered, say, a 3% cushion to cover transaction costs, there would be many more entries in the short sale list. The sellers this month for the most part have been pretty lucky, as most of them have been in their properties long enough to get a nice gain out of their sales. Kudos to them for great market timing.

2008-05-05 2006-06-30 -1.0 320 S. Broadway B     2405
2008-05-12 2006-11-15 -8.0 2916 Gibson Place      972
2008-05-12 2005-09-15 -6.0 1617 Wollacott Street 1824

Wednesday, May 21, 2008

Los Angeles Beach Cities Resale Activity for April 2008

Here are the April median price charts for sales of existing homes in Los Angeles county.

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   22    $720     -7.8%   N/A      N/A      N/A 
El Segundo        90245    9    $815     +2.0%     1     $540    -0.9%
Hawthorne         90250   15    $401    -25.6%     2     $310   -15.2%  
Hermosa Beach     90254    8  $1,819    +31.8%     4     $829   +40.7%  
Lawndale          90260    7    $408    -13.2%   N/A      N/A      N/A  
Manhattan Beach   90266   30  $1,373    -20.0%     2   $1,325   -24.8%  
Palos Verdes Pen. 90274   27  $1,450    +18.4%     3     $439    -3.5%  
Rancho P.V.       90275   25    $968    -18.7%     5     $416   -28.6%   
Redondo Beach     90277   10    $910    -23.2%    11     $710    -5.0%   
Redondo Beach     90278   14    $630    -18.6%    12     $585   -14.8%

CAR/DQNews April 2008 Report for Redondo Beach

DQNews has released its housing market data for April 2008 for California cities. Here is CAR's April data.

The median April sale price for a Redondo Beach home (new or existing, SFR or condo) was $695,000, down -11.9% YOY. DataQuick's statistic is based on 43 sales, which is a decent number of records with which to calculate such a statistic. This calculation is better than the zip code / property type breakdown calculation which DataQuick also reports and which I complain about regularly. 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 for April came in high at $756,000, based on 40 records. However I did at least sense that sales had picked up enough that some of the many markdowns I've been observing in the market would be realized, and the price trend was headed down.

Here is how the beach cities look:

Area               Sales      Median Price       Year Ago      Pct Change
El Segundo           10         $807,500         $720,500         +12.07%
Hermosa Beach        13       $1,290,000       $1,101,750         +17.09%   
Manhattan Beach      30       $1,372,500       $1,850,000         -25.81%
Redondo Beach        43         $695,000         $789,000         -11.91%     
(they don't add up)
Beach Cities         83       $1,025,000       $1,000,000          +2.50%

Beach Cities is an aggregation of South Redondo Beach, Manhattan Beach, Hermosa Beach, El Segundo, and Playa del Rey. Redondo Beach, shown in the chart above, is both the north and south parts of the city.

For the South Bay area, DataQuick reports a median price of $597,000, down -12.85% YOY, based on 372 sales.

The median home price in the Westside is $1,225,000, up +40.80% YOY, based on 41 sales. West Los Angeles median price was $725,000, down -3.20% YOY, based on 151 sales. Palos Verdes Estates recorded a median of $1,270,000, up +7.63% YOY, based on 28 sales, and Palos Verdes Peninsula area recorded a median price of $1,075,000, down -8.51%, based on 57 sales. Malibu is down -8.49% at $1,735,000, based on 8 sales, while Beverly Hills is up +13.11% to $1,617,500, based on 18 sales.

Monday, May 19, 2008

L.A. Times: At the luxury end, home prices are falling

The publication of this piece by Peter Y. Hong on May 20 is a milestone in our path to the resolution of the housing bubble. We have been hearing from perennial housing optimists that the more affluent areas would remain immune to the housing bubble bursting, even though our previous slump in the early 90's showed us otherwise. Now we have it in print that the affluent areas are as affected as other areas.

Tom Davidoff at UC Berkeley pretty much has it right. According to a prior story published in March:

Davidoff didn’t hazard a guess on how long prices would fall, but he said that affluent areas – where prices have not fallen as sharply – would eventually feel the pain as well. The higher end of the market has seen only modest price declines in large part because most longtime homeowners in these areas have plenty of equity and aren’t under financial pressure to sell, Davidoff said. So they are sitting on the sidelines, waiting for the market to turn around before they plant “For Sale” signs in their frontyards. But eventually, more and more homeowners in these areas will choose to sell, deciding they no longer want to defer plans such as retirement or a move to another region. “They’re going to start selling, and prices will get to their true market level,” Davidoff said.

And now the vultures are coming to roost. Places like (gasp) Beverly Hills, Newport Beach, and Rancho Palos Verdes are starting to show the kinds of drops percentage-wise that so far has been largely confined to mid-level and lower-level housing markets.

"You can't have one market hugely cheaper than another forever," according to Davidoff. Again, he stresses that the time lag is due to the affluent not being under financial distress and forced to sell. But at some point, if they want to move forward with their own plans, they have to sell, and they may have to cut their asking prices to do so.

The article describes one 90210 mansion originally put on the market over a year ago for $12 million. Not even a price cut in February of over $500,000 stirred any interest. The listing agent said that the "Maginot Line", the "psychological break point", was cutting the asking price to below $10 million.

It isn't just Los Angeles County where we are seeing such declines. San Francisco and Orange County also are seeing declines.

Steven Thomas, an Aliso Viejo broker, notes that foreclosures now make up more than 40% of homes for sale in Mission Viejo and Laguna Hills. The market over $1 million has "definitely changed." The activity below $500,000 has been "tremendous." In addition, foreclosures, which have been practically unheard of in the affluent areas, now are rearing their ugly heads. In Coto de Caza, 17% of the homes for sales are either foreclosures or are listed as short sales.

However, not all affluent areas have uniformly experienced a hit. The article notes that whereas Rancho Palos Verdes was down, the Rolling Hills area was up.

I would not take DataQuick numbers too seriously for any one particular area, for the reasons I have been citing for many months - there are usually too few sales to be statistically valid, and when sales are sorted out by zip code and by property type, the invalidity is even worse. Still, I think the article is a milestone, not because somebody came up with numbers "proving" that the affluent areas are declining, but because psychologically the crowd (via the media) is now acknowledging that affluent home sellers are having the same difficulties selling their properties as do lower-end home sellers. The article even states that one can see dramatic price moves in a zip code on just a handful of sales.

This decline, viral-like in its ferocity, struck first in the outlying areas, such as Antelope Valley and the Inland Empire, where so many buyers obtained their properties with sub-prime loans. Declines in the more affluent areas shows that this is not just a case of too many sub-prime loans, ARMS, or even HELOCs issued. This is a case of the same deflationary psychology (to cut back to conserve) that hit buyers in the lower-end markets now hitting buyers in the higher-end markets. People are people no matter where they live and what their income level, and they are swayed by the same psychological forces. The bursting bubble waters have been inching higher and higher, and though the affluent areas have been on higher ground, it is my belief that eventually, they, too will succumb to the bursting bubble.

DQNews: Southland home sales highest in eight months

That's the hope-filled headline according to DQNews. Digging deeper into the article, though, we learn that this was the weakest April since 1995, the second-lowest April that DataQuick has recorded, and 38% below the April average.

The boost comes from an increasing number of lower-end (below $500,000), mainly in the Inland Empire area (Riverside), where the bargain hunters are picking through the higher numbers of foreclosures. Of all the homes sold in April that were existing homes, 37.5% had been foreclosed in the prior 12 months. In March, that figure was 35.8% (revised). A year ago, it was 4.6%. Homes below $500,000 accounted for roughly 66% of sale volume gain from March.

Southland April home sales are down -19% from April 2007. Only Riverside county reported an increase in sale volume, very likely due to bargain hunting.

DataQuick stated that "a few more buyers stepped off the sidelines last month" to buy homes at substantial discounts to the peak. That sales would bounce in the Inland Empire, where foreclosures have particularly ravaged the area, is no surprise. DataQuick notes, "We continue to look for evidence of a sales bounce in the mid-priced and higher-end markets along the coast. If the higher conforming loan limits are making a difference in those areas it's certainly not a large one, at least not as of the end of April."

Prior to Day of Reckoning in August 2007, jumbo loan financing accounted for almost 40% of So Cal mortgages. For April that number was 15.1%. Southland buyers committed themselves to a typical monthly payment of $1,716, down from $1,816 in March, and down from $2,356 YOY. Foreclosures remain pegged at record levels, ARM financing is at a 6 year low, and non-owner occupied buying activity is increasing.

County          Apr-07   Apr-08   % Chng       Apr-07      Apr-08     % Chng
Los Angeles     7,225     5,016    -30.6%     $540,000    $435,000    -19.40%
Orange          2,682     2,166    -19.2%     $629,000    $500,000    -20.50%
Riverside       2,987     3,186      6.7%     $409,000    $295,000    -27.90%
San Bernardino  2,049     1,667    -18.6%     $370,000    $265,000    -28.40%
San Diego       3,436     2,809    -18.2%     $490,000    $400,000    -18.40%
Ventura           890       771    -13.4%     $572,000    $445,000    -22.20%
SoCal          19,269    15,615    -19.0%     $505,000    $385,000    -23.80%

Peter Y. Hong at the L.A. Times also covers DataQuick's release in Movement in weak Southern California housing market. He mentions that April sales are up 22% over March, which is not surprising considering the backlog of foreclosures on the market. According to DataQuick, the average increase in sales from March to April is about 1.8%.

I can hardly blame the knife shoppers out in Riverside. A home for $295,000 must seem like a steal after they've fairly recently been selling for over $400,000. There will always be buyers who see prices reach a certain level and won't care if prices fall further. Then there will be buyers who think the market had bottomed and then find themselves bloodied as prices fall further. If the economy continues to spiral downward (after possibly a temporary election year bounce), I expect far more blood within the next few years. $295,000 still strikes me as pricey.

I'm getting the feeling that Redondo Beach remains in a slump. So far for the month there are 28 sales recorded for 90277 and 90278 in Melissa Data. For May of 2007 there were 118 sales recorded. Even if those 28 sales tripled by the end of the month, which I don't think is likely, that figure would still be nearly 29% below last May's sales volume. If I had to make a wild-ass guess, I estimate maybe 60 sales for May if this pace continues. Who knows, maybe Memorial Day weekend will bring out some buyers. Or maybe the end of the school year will bring out buyers.

At the same time, I'm recording about three new property listings a day. That may sound low compared to last year, but in 2007 my database was much newer and didn't have a lot of old repeats in it. This year, I'm noticing plenty of re-listings for properties that were listed back in 2006 and never got sold. I don't count those as new listings.

I mentioned in a previous post that I visited Ruxton Pacific last weekend (10th-11th). Last night (the 18th) at 6 PM I got a phone call from a realtor there. The weekend I visited, they had about 40 people drift through. This past weekend, it was about half that. I told her honestly but nicely no we were not looking to buy, we just felt that So Cal was too expensive. I told her that we were thinking of moving out of state, and when she asked, I named places. I even told her we are considering moving out of the country, which is also true. In short, we are still keeping all our options open, because it's still way too early for us to make any move. It was only fair to let her know that, and I hardly think we're the only ones who think that way. Plus, I figure if enough people tell the realtors that they aren't selling what we want, maybe something will change for the better.

Wednesday, May 14, 2008

Where are people getting the money to buy at these prices? Subprime Part II

I'm going to keep this brief.

A few times blog readers have asked, where is the money coming from that people can buy into this market? They are implying that properties are still very grossly overvalued.

In March, I posted this:

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.

You can find the link to the original posting here.

It took two months, but it looks like the media is catching on.

Folks, the powers that be are trying to keep this game going as long as possible. We will see if leading the horse to water will compel him to drink. Has deflationary psychology finally set in for the buyer? Stay tuned.

-- Susan

Tuesday, May 13, 2008

L.A. Business Journal: Sales increase as home prices fall

The headlines for this month's article by Deborah Crowe at L.A. Business Journal are reflecting an upbeat hopeful tone. Volume rises 15% from previous month. Home sales gain ground in April. There's even a graphic titled Hitting Bottom?

But dig deeper into the article and you'll find that SFR home sale volume in April was down -28.3% YOY, and that's in keeping with a five week reporting period this year. But if you compare a 4 week period now with a 4 week period from a year ago, home sale volume is down -43%. By all means, let's report the more bullish figure! And as for that Hitting bottom? graphic, I cannot fathom why it would show a continuing plunge in price, as opposed to an arguably more bullish sale volume bounce. I mean, if I wanted to spin the idea of a bottom, I'd much rather show sale volume bouncing up.

The industry professionals quoted in the article note that there appears to be a "first time home buyer wave" (I call it falling Ginzu knife shopper wave) in Los Angeles and Orange counties. Prospective buyers are starting to come out of the woodwork but foreclosures are "muddying" the market so it will take a few years to work through them.

Steven Thomas of Re/Max sounds downright optimistic when he states that prices will stop falling early next year, "then we'll be at a flat market for a couple of years, price-wise, probably moving not more than the rate of inflation. But at least we'll have a lot more transactions."

Michael Carney of Cal Poly Pomona sounds more worried. He feels prices are "falling too fast" and is starting to think the bottom could be further off than most people realize. A year ago he anticipated that prices would be down 15% from the peak. He has shifted that to 20%. "That prices are falling faster than sales is not a good sign in terms that the bottom is near." In the 1990's it took almost six years for prices to drop 20%. But he notes, "You'll start seeing YOY sales volume pick up long before we see a turnaround in prices."

(Well I've got news for you. From the peak at $585,000, the median Los Angeles County SFR sale price is down -22% which has already exceeded Carney's forecast. So I don't understand exactly what Carney is talking about. In my opinion, there is a possibility we've finally hit the slippery part of the S curve and prices could fall hard and fast. I'll know better when I see even the affluent areas getting walloped.)

The credit crunch, which started in the subprime category, has spread to more affluent home buyers when they became unable to obtain jumbo loans (which at the time had a $417,000 limit). That limit is now $729,500, but financing under this limit has been "slow getting off the ground."

-------------------------- SFR ----------------------------------
COMMUNITY          ZIP    Apr     %YOY        Apr    %YOY
                          Sales   Change      Price   Change
L.A County              3,647       -28%    $445,000  -21% 
El Segundo       90245     10         0%    $808,000  -17%
Hermosa Beach    90254     17       +31%  $1,415,000  +21%  
Manhattan Beach  90266     26       -50%  $1,435,000  -17%  
Redondo Beach    90277     11       -45%    $800,000  -31%
Redondo Beach    90278     19       -27%    $725,000   -6%

------------------------ CONDO ----------------------------------
COMMUNITY          ZIP    Apr     %YOY       Apr       %YOY
                          Sales   Change    Price     Change
L.A. County                919     -40%    $400,000   -10%
El Segundo       90245       3     -40%    $799,000   +28%
Hermosa Beach    90254       6     +20%    $826,000   +10%
Manhattan Beach  90266       0     N/A         N/A     N/A 
Redondo Beach    90277       8     -70%    $738,000    -7%
Redondo Beach    90278      21     -30%    $612,000   -18%

This is now 2 months with no condo sales in Manhattan Beach.

Palmdale in north Los Angeles County is an area that has been particularly hard hit. In the old bubble boom days, the "highly desirable" model homes, the ones with full lush landscaping and marble counters and granite floors got sold at premium prices at auction. Not any more. Kennedy Wilson Auction Group is scheduling a June 1 auction to get rid of 17 luxury model homes. The starting prices will range between $125,000 and $250,000, down from $289,000 to $605,00 during the bubble peak. You can see the auction website here. One quote in the article that was amusing - Our program works for builders because we price them below market, and let the buyers determine the market.

The most expensive homes (SFRs) in April were in Beverly Hills 90212 (+16% YOY) and 90210 (+18%); Santa Monica 90402 (-29%); Malibu 90265 (-28%); West Hollywood 90069 (-12%); Pacific Palisades (-4%); Brentwood 90049 (-16%); Palos Verdes Estates (+40%); San Marino (+26%); and Laurel Canyon 90046 (+64%).

The most expensive condos were in Hermosa Beach 90254 (+10%); El Segundo 90245 (+28%); Santa Monica 90403 (-3%) and 90405 (+6%); Marina del Rey (-6%); Redondo Beach 90277 (-7%); S. Robertson/Fairfax area 90035 (+26%); Warehouse District 90021 (+7%); and Brentwood 90049 (-19%).

The areas with the greatest SFR price losses in April were in Glendale 91202 (-55%); Long Beach 90813 (-46%); Bel-Air 90077 (-44%); Littlerock 93543 (-44%); San Pedro 90732 (-40%); Long Beach 90810 (-40%); Downey 90240 (-40%); South L.A. 90001 (-39%); Lancaster 93534 (-39%); and Palmdale 93550 (-39%).

The areas with the greatest condo price losses were in Winnetka 91306 (-24%); La Habra 90631 (-32%); North Hills 91343 (-35%); Canyon Country 91387 (-37%); Hacienda Heights 91745 (-28%); Newhall 91321 (-33%); Northridge 91325 (-47%); Paramount 90723 (-30%); Westlake Village 91362 (-25%); and Long Beach 90807 (-23%).

On Sunday I stopped by Ruxton Pacific to see how things were going there. They are throwing in a year of free HOA fees and no closing costs to sweeten the deal, if you choose to view those townhomes as deals. Out of 27 units, five are sold, but three of them were sold last year if I remember correctly. So that means that two have been sold so far this spring.

Saturday, May 10, 2008

Question for housing bubble blog readers

Blog readers, I am not a real estate pro and don't have insider knowledge of how bogus sales end up in sale data. One reader has questions. Can anybody 'splain this to us? Thanks!

I have a few questions and I am wondering if anyone can help. I have been watching the beach cities market for a little over a year now. We moved here in 2007. We sold our previous home (in another state) and have been renting since our move.

My questions concern homes I had been watching and their subsequent sales. The only information I have has been either been taken from Zillow, Property Shark or both.

Why does a home sell or transfer hands with a $0 sales price? For what benefit and to whom? For instance, one property I had followed, a spec home, had transferred hands, from the builder to a buyer, with $0 as the price. Then magically it was sold back to the builder, for $0 again, and then resold to someone else for the original and full asking price of close to $2 million. No mortgage was listed so I gather it could have been an all cash sale. Yes?

Am I being obtuse and this is normal business as usual or did something funny happen to prop up the comps? I really don't know or understand and I would just like some insight. I've seen this a few times now and I can't seem to figure it out. Thanks.

Thursday, May 08, 2008

Preliminary look at April 2008 Redondo Beach housing market data

I pulled my sales data set out of the Manhattan Beach Reporter again. There may be a few May sales mixed up in here since the sale dates in MBR are not precisely given. Oh well, I can only work with what I can scrape up.

It looks like there was a slight pickup in lower end sales in April. Also, my calculation of DOM has plummeted back down to figures more in line with what I was calculating last year before the credit crisis hit, rather than the horrid figures I have been calculating during the winter. Median and average square footage have also shifted back down, providing further evidence of more lower end homes selling. So there are definitely some signs of life in this market.

STAT      OCT 2007  NOV  2007   DEC 2007   JAN 2008   FEB 2008   MAR 2008   APR 2008
records         44         37         26         25         25         35         40
MEDIAN    $755,000   $832,500   $782,500   $795,000   $755,000   $789,000   $756,000
AVERAGE   $770,416   $933,956   $832,827   $932,117   $831,500   $961,714   $833,000
MIN       $369,900   $379,000   $486,500   $449,900   $520,000   $585,000   $420,000
MAX     $2,560,000 $2,500,000 $1,500,000 $2,130,000 $1,590,000 $2,100,000 $2,425,000

These figures are from my SUPPLY records for which I found sales. Looking again at the numbers for April 2007, I had 99 records with a median sale price of $799,000 and an average of $888,488. My April 2008 numbers are clearly down from 2007 (median down by 5.3%), so I think there is a good chance we could see an official YOY decline in Redondo Beach median home price when DataQuick publishes statistics later this month. We shall see. Minimum sale price a year ago was $470,000 and the maximum was $1,750,000, according to my data.

Median square footage is 1790 and average is 1826. In 2007, out of 99 records, median square footage was 1868 and average was 1925. So median square footage has shifted down by about 4.2%.

Note: records=35 is wrong, should read records=40

If you've been reading this blog long enough you'll know that my DOM is (hopefully) a representation of a more realistic time it takes to sell a house. In other words, my DOM is just not starting the clock from the date the property was last relisted before it sold. My DOM starts the clock the first time I notice a home listed, and I assume it remains listed until I find a sale record for it.

My calculated median DOM is back down to 92 days (roughly 3 months) and average DOM is at 133 days (about 4.3 months). However you can see the distribution remains wacky. New home sellers who have a clue that they need to price their home competitively to sell have a good shot at selling their home within around 60 days. 2 months is still an excellent time on market, considering the horrible shape the mortgage industry is in. But the key is the property needs to be priced very competitively. Otherwise the listing may just sit and rot, as you can see from the right hand cluster around 240 days (8 months).

And how much did April home sellers have to cut out of their asking prices to get their homes sold? The median percent reduction was 6.02% and the average was 7.04%. Last month, median PCTRED was 6.4% and the average was 7.2% so it looks like PCTRED is almost remaining steady.

And now I want to explain this newly added chart. I am trying to keep track of asking price history as a way of measuring the "value" of the unsold homes. To produce this chart, each month's median price calculation is the median current asking price for homes newly listed during that month or whose asking prices are changed during that month. That's what I mean by "Refreshed by Month."

It was either this calculation, or to try calculating the median current asking price on all unresolved inventory every single month, and that is too cumbersome a task for me to tackle. However, I think my "refresh by month" approach will work. The most recent month will encapsulate the most recent opinion on the market, whereas a calculation that carries all the baggage of all unresolved inventory will probably carry many outdated opinions on the market.

Ignore the initial spike up. That just means that my database had no records in it yet. As time progresses, the data gets more accurate as more records are added to my database. As you can see, asking price has been drifting down. For April 2008, the median current asking price ended up at $768,500.

This other new chart is the history of percentage price reduction from my records. I simply take my median and average PCTRED calculations and tack them on to this graph.

Unfortunately I do not have much history to show here, so I don't have a definite sense of how this graph behaved during the bubble boom. If I had to guess, there would have been no or few price reductions and the lines would have been below or hovering around 0. But it seems to me that during a market with normal seasonal swings, price reductions would peak during the slow winter months (if you want to get your home sold during the winter, you may have to cut the price more) than during the busier spring - summer - fall seasons, when you may not have to cut at all. So I would expect the graph to rise into, say, January, and fall down from there. That appears to have happened in 2007. In March 2007 the lines bottomed and wavered around a little, but starting in July 2007 the lines started to climb more seriously. Reductions peaked once again in January, and started to fall off - they have bottomed in March again, now will the lines bounce around, like last year, or will they continue to climb?

Finally, I'll throw in some short sale data. The first column is the sale date, second column is the prior sale date, and third column is percent loss.

There's something screwy going on with the Paulina house to have had such a quick succession of recent sales. The Rindge Lane property is rather interesting. It sold for about $1.165 million at a peak in July 2005, and went into foreclosure. I guess the bank owning it tried listing it in the high $900,000's and finally ended up selling it for $850,000.

2008-04-09 2005-06-15  -4.0   108 S. Francisca Avenue A 1548
2008-04-07 2005-12-13 -16.0  1030    Avenue A            850
2008-04-21 2005-07-15 -27.0  1206    Rindge Lane        2620
2008-04-21 2007-11-06  -6.0   410 N. Paulina Avenue     1760
2008-04-08 2005-09-15 -13.0  2110    Vanderbilt Lane A  1471 

Oops I apologize for the typo. Rindge Lane is down 27%, not 37%.

Ignoring the Paulina house, you can see that these short sales sold at a loss from their peak values in 2005. So home prices may really be back down to 2004 valuations. That seems to come up consistently, no matter what a realtor will tell you about median price still climbing in Redondo Beach. And the scary thing is, my calculation just goes by strict sale numbers, and does not take into account selling costs. Had I done so, there would be more properties listed here that, while they may not show a loss, would definitely show that no money was made in the sale.

Stay tuned.

Friday, May 02, 2008

Los Angeles County South Bay Beach Cities Real Estate $$$ Transacted for April 2008

By dollars transacted this is the weakest April market that the area has experienced in years.

This month, it appears to be Redondo Beach and Manhattan Beach that are the markets of the damned. On a purely raw dollar basis, Redondo Beach home sale dollar volume transacted in April 2008 is down -51.1% YOY, while for Manhattan Beach the number is -57.3%. Did one RB zip code hold up better than the other? Well, I guess it depends on whether you think that -35.9% YOY (north Redondo - 90278) is "doing better" than -66.4% YOY (south Redondo - 90277). Affluent buyers are snubbing these two cities and for the moment are turning their attention toward Hermosa Beach (90254), where dollar volume is up +34.9%, on a sales volume change of 18 properties in 2007 to 23 in 2008. El Segundo ends up being the winner among the weak markets, with dollar volume down "only" -14.9% YOY.

It's clear that the government supplied bong hits in the form of higher conforming loan limits and shameful FHA loan terms (which I call "subprime + 5%") have not yet shifted this market out of its slump in any meaningful way. There is a pulse, but not much else.

There is a large very old condo complex a few doors down from us, and I am amused to see what may be a price war developing between two different units for sale. One unit, #2, sold for $587,000 in July 2006. It was remodeled and last June (yes, almost a year ago) it was put on the market for $609,000. Its price history has subsequently been:

$599,000 08/14/07
$579,000 08/22/07
$569,000 09/23/07
$549,000 09/28/07
$539,000 10/08/07
$571,000 11/16/07
$550,000 12/03/07
$535,000 01/16/08

Then a few weeks ago a different unit in this same complex went up for sale with an asking price of $545,000. So #2 knocked down its asking price to $499,000. As my significant other said, "Maybe they will race to the bottom."

By the way, these units when they rent out typically go for about $2,300 a month. According to Zip Realty, an estimated mortgage payment right now for Unit #2 (which I don't think includes taxes and insurance) is $3,236 a month. Assuming rents provide a price support level, and that rents remain stable, I think either Unit #2 or other comparable units in this building would have to be selling around $276,000 before we see some sort of bottom in place. In other words, prices could drop by 45% (looking at the difference between $499,000 and $276,000) before rent-mortgage equilibrium is reached.

But I am more bearish than that. I think the rental market will eventually start to feel downward pressures as households either start doubling up in bloataminiums for rent or start living out of their SUVs or pack up and leave the area. I am more inclined to think the latter two options because renters who have been trying to avoid this whole market mess nevertheless have gotten caught up in it as their landlords have foreclosed on their properties - ultimately leaving renters homeless anyway. And if rents don't come down, I think that will motivate people even more to leave the area.

Most people don't know yet what it means to really cut back and alter one's lifestyle without resorting to piling up expenses on credit cards. They think that a recession means the gardener can only come once a month or you can only have your nails done once a month instead of twice a month because the cost of gasoline is higher. They are tweaking the edges of their lifestyle but still basically keeping the same lifestyle. When people finally switch over their brains and get into the expense-cutting zone and start taking a machete to the monthly expenditures and start seriously questioning everything, what they pay for rent will be one of the things they question. And it may mean they start thinking about leaving the area.

YOY Comparisons

These numbers are a YOY comparison of the doubly smooth moving average (not raw data) of dollar volume charts. I think of them as "recent pain" (or recent gain) indicators.

By the way, I am going strictly by the numbers MelissaData tells me. If anybody can enlighten me on sales volume in Playa Vista, please do so. Other than Playa Vista, everything else looks weak YOY.

90094         128.5% Playa Vista
90254          -5.2% Hermosa Beach
90501         -13.7% Torrance
90245         -14.6% El Segundo
90064         -16.1% Rancho Park/Cheviot Hills
90045         -17.4% Westchester
90034         -25.1% Palms
90292       -26.8% Marina del Rey
90275         -29.0% Palos Verdes Estates
90291         -32.7% Venice
90505         -33.3% Torrance
90504         -34.8% Torrance
90293         -35.8% Playa del Rey
90501-90505   -35.9% Torrance Combined
90401-90405   -38.1% Santa Monica combined
90066         -38.8% Mar Vista
90056         -40.3% Ladera Heights
90016         -40.9% West Adams
beach cities  -44.6% 4 Beach Cities combined
SW county     -45.1% Southwest L.A. County
90036         -45.8% Park La Brea
90035         -47.5% West Fairfax
90008         -47.6% Baldwin Hills / Leimart Park
90502         -47.6% Torrance
90277         -48.0% Redondo Beach (south)
90717         -49.1% Lomita
90732         -49.4% San Pedro/Rancho PV
90232         -51.0% Culver City
90277-90278   -53.0% Redondo Beach combined
90266         -54.4% Manhattan Beach
90302         -54.7% Inglewood
90249         -55.0% Gardena
90260         -55.0% Lawndale
90019         -55.9% Country Club Park/Mid City
90301         -55.9% Inglewood
90278         -56.2% Redondo Beach (north)
90230         -57.1% Culver City
90250         -57.5% Hawthorne
90746         -58.0% Carson
90043         -59.3% Hyde Park, Windsor Hills
90007         -59.4% South Central
90745         -60.2% Carson
90247         -62.7% Gardena
90503         -62.9% Torrance
90044         -63.5% Athens
90018         -64.3% Jefferson Park
90047         -66.6% South Central
90037         -67.9% South Central
90062         -68.6% South Central
90301-90305   -68.7% Inglewood/Lennox combined
90731         -70.1% San Pedro
90305         -75.1% Inglewood
90304         -80.3% Lennox
90303         -86.6% Inglewood
90744        -139.7% Wilmington

Relative Strength

This is a longer-term view of the strength of dollar volume in a given zip code. For this month 5.4 is the strongest (suffering the least amount of chronic pain) and -1.1 being the weakest (suffering the most chronic pain). Think of it is as the area above 0 on the YOY graph with the area below 0 of the YOY graph subtracted out.

90094        5.4 Playa Vista
90247        3.1 Gardena
90305        2.6 Inglewood
90034        1.7 Palms
90044        1.6 Athens
90292        1.4 Marina del Rey
90746        1.4 Carson
90047        0.9 South Central
90062        0.9 South Central
90301-90305  0.8 Inglewood/Lennox combined
90502        0.8 Torrance
90007        0.8 South Central
90304        0.8 Lennox
90018        0.7 Jefferson Park
90293        0.7 Playa del Rey
90016        0.7 West Adams
90501        0.7 Torrance
90301        0.7 Inglewood
90745        0.7 Carson
90250        0.6 Hawthorne
90302        0.6 Inglewood
90303        0.6 Inglewood
90732        0.6 San Pedro/Rancho PV
90064        0.5 Rancho Park/Cheviot Hills
90043        0.5 Hyde Park, Windsor Hills
90254        0.5 Hermosa Beach
90019        0.5 Country Club Park/Mid City
90037        0.5 South Central
90008        0.5 Baldwin Hills / Leimart Park
90291        0.4 Venice
90045        0.4 Westchester
90230        0.4 Culver City
90503        0.4 Torrance
90249        0.3 Gardena
90036        0.3 Park La Brea
90245        0.3 El Segundo
SW county    0.3 Southwest L.A. County
90501-90505  0.3 Torrance Combined
90260        0.3 Lawndale
90232        0.2 Culver City
90278        0.2 Redondo Beach (north)
90066        0.2 Mar Vista
90731        0.2 San Pedro
90505        0.2 Torrance
90401-90405  0.2 Santa Monica combined
90277-90278  0.1 Redondo Beach combined
beach cities 0.1 4 Beach Cities combined
90056        0.1 Ladera Heights
90035        0.1 West Fairfax
90266        0.1 Manhattan Beach
90717        0.1 Lomita
90277        0.1 Redondo Beach (south)
90504        0.0 Torrance
90275       -0.1 Palos Verdes Estates
90744       -1.1 Wilmington

The beach cities charts look as weak as those for SW Los Angeles County in general. It astounds me to read straight-faced press releases by local realtors suggesting that the beach cities markets are somehow immune to the problems besieging other areas. That is simply not true. While the bong hits may ultimately boost the local area in the coming months, underlying fundamental problems remain.

You can view home sale dollar volume history for a particular zip code through my regional tracker, and also my Google map tool.