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

Take a good look at some of these area graphs around spring-summer 2007 and you'll notice something important. In many areas, dollar volume started declining before Financial Armageddon Day last August. In fact, some areas started their dollar volume decline even before Bear Sterns started making noise last June.

Why is this important? Because dollar volume was declining even before the credit crunch hit, it's just that the credit crunch has greatly accelerated the decline. This leads me to believe that this decline would have continued on its course, though perhaps a slower one, even without the added catalysts of the financial problems of Countrywide, Bear Stearns, and the disintegration of hundreds of sub-prime lenders that have deservedly gone bust. Perhaps the masses are slowly changing their minds about real estate as such a great investment.

I've been thinking about possible scenarios that could halt this slide. While credit conditions remain tight, there remain new terms such as the higher conforming loan limits that gets the borrower a better rate on more credit, and loopholes like FHA terms that are big enough to drive a gas-guzzling SUV through. So there is some credit available. Are potential buyers finagling these opportunities?

Could buyers siphon money out of their 401Ks and IRAs to fund their home purchases? Would they be willing to do so? I am not yet aware of any evidence that buyers have collectively decided to do so or even that they want to do so.

Clearly, one financial condition that changes the picture is the cost of renting meeting or exceeding the cost of owning. Here in the South Bay, we are still a long way from tipping the scales. Every day I've been recording price cuts out of Zip Realty. Instead of so many niggling $10,000 or $15,000 price cuts every few weeks, it occurred to me that the "sensible" thing for a seller to do would be to cut the price in one swoop to the point where somebody could rent the property for roughly the same amount as monthly mortgage payments (30 year fixed), taxes, and insurance. We would see some major activity were that to occur - assuming, of course, that buyers had the cash reserves for a down payment - and that's a risky assumption.

Price cut activity has been heavy. Some properties have seen substantial markdowns. Assuming that the economy is deteriorating, that prices ran up on a credit bubble for many many years, and that Joe and Jill Consumer may be slowly changing their minds about the perceived values of the homes they see for sale, I question how effective these niggling price cuts will continue to be.

There is another thing on the graphs (below) that are noteworthy. The beach cities, in terms of dollar volume, now look to be suffering a greater decline than Southwest Los Angeles County as a whole. One of my recent posts did cite an article that quoted an industry analyst who noted that the "coastal areas" have been taking a hit. Oh my. The beach cities are supposed to be "immune" to the turmoil hitting the other areas, aren't they?

Keep in mind that May figures have been cut short, by the way Melissa Data records its sales. So the last few days of sales in May will show up in June figures. I am seeing a bounce, but I think it is a seasonal bounce, not so much a bubble bounce. There are still plenty of falling knife shoppers out there...

YOY Comparisons

These numbers are a YOY comparison of the doubly smooth moving average of dollar volumes. I think of them as "recent pain" (or recent gain) indicators.

Notice that even Playa Vista has simmered down a bit. Other than 90094, everything else is down.

90094          38.6%    Playa Vista
90254         -10.9%    Hermosa Beach
90045         -18.6%    Westchester
90034         -27.0%    Palms
90245         -27.8%    El Segundo
90302         -31.5%    Inglewood
90292         -32.1%    Marina del Rey
90501         -32.2%    Torrance
90275         -34.6%    Palos Verdes Estates
90064         -36.1%    Rancho Park/Cheviot Hills
90035         -36.7%    West Fairfax
90502         -38.5%    Torrance
90504         -39.2%    Torrance
90505         -39.3%    Torrance
90008         -41.9%    Baldwin Hills / Leimart Park
90232         -43.0%    Culver City
90066         -43.5%    Mar Vista
90501-90505   -44.7%    Torrance Combined
90401-90405   -45.8%    Santa Monica combined
90016         -46.5%    West Adams
90291         -47.6%    Venice
SW county     -49.0%    Southwest L.A. County
90249         -49.8%    Gardena
90277         -50.0%    Redondo Beach (south)
beach cities  -50.5%    4 Beach Cities combined
90717         -51.9%    Lomita
90036         -53.1%    Park La Brea
90260         -54.2%    Lawndale
90745         -54.4%    Carson
90293         -54.5%    Playa del Rey
90250         -55.2%    Hawthorne
90277-90278   -56.6%    Redondo Beach combined
90056         -56.7%    Ladera Heights
90019         -57.2%    Country Club Park/Mid City
90305         -58.2%    Inglewood
90732         -59.4%    San Pedro/Rancho PV
90746         -59.5%    Carson
90230         -60.1%    Culver City
90278         -61.0%    Redondo Beach (north)
90266         -61.7%    Manhattan Beach
90503         -62.3%    Torrance
90301-90305   -62.6%    Inglewood/Lennox combined
90301         -62.8%    Inglewood
90007         -63.2%    South Central
90044         -64.9%    Athens
90043         -66.0%    Hyde Park, Windsor Hills
90037         -66.3%    South Central
90047         -66.6%    South Central
90247         -67.1%    Gardena
90731         -70.2%    San Pedro
90062         -70.3%    South Central
90018         -72.4%    Jefferson Park
90304         -83.7%    Lennox
90303         -84.2%    Inglewood
90744        -152.8%    Wilmington

Relative Strength

This is a longer-term view of the strength of dollar volume in a given zip code. For this month 5.5 is the strongest (suffering the least amount of chronic pain) and -1.3 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.

We are getting more areas now falling at 0 and below.

90094          5.5 Playa Vista
90247          3.0 Gardena
90305          2.6 Inglewood
90034          1.6 Palms
90044          1.6 Athens
90292          1.4 Marina del Rey
90746          1.3 Carson
90047          0.9 South Central
90062          0.8 South Central
90301-90305    0.8 Inglewood/Lennox combined
90502          0.8 Torrance
90007          0.7 South Central
90304          0.7 Lennox
90018          0.7 Jefferson Park
90501          0.7 Torrance
90016          0.6 West Adams
90293          0.6 Playa del Rey
90301          0.6 Inglewood
90302          0.6 Inglewood
90745          0.6 Carson
90250          0.6 Hawthorne
90732          0.5 San Pedro/Rancho PV
90303          0.5 Inglewood
90064          0.5 Rancho Park/Cheviot Hills
90254          0.5 Hermosa Beach
90043          0.4 Hyde Park, Windsor Hills
90019          0.4 Country Club Park/Mid City
90008          0.4 Baldwin Hills / Leimart Park
90037          0.4 South Central
90045          0.4 Westchester
90291          0.4 Venice
90230          0.3 Culver City
90503          0.3 Torrance
90249          0.3 Gardena
90245          0.3 El Segundo
90036          0.3 Park La Brea
SW county      0.3 Southwest L.A. County
90501-90505    0.2 Torrance Combined
90260          0.2 Lawndale
90232          0.2 Culver City
90066          0.2 Mar Vista
90278          0.2 Redondo Beach (north)
90731          0.1 San Pedro
90505          0.1 Torrance
90401-90405    0.1 Santa Monica combined
90277-90278    0.1 Redondo Beach combined
beach cities   0.1 4 Beach Cities combined
90035          0.0 West Fairfax
90056          0.0 Ladera Heights
90266          0.0 Manhattan Beach
90277          0.0 Redondo Beach (south)
90717          0.0 Lomita
90504          0.0 Torrance
90275         -0.1 Palos Verdes Estates
90744         -1.3 Wilmington