That's the headline in a Howard Fine story on the front page of the July 7 print edition of the Los Angele Business Journal. The skeptical bear in me says NO, but let's see what the article says.
The article says that June sales were good, "exceeding the seasonal surge, especially in condos." This was more than double what was sold in May, and the largest number since July 2007.
This was still down 4% YOY. And, according to Home Data, the 3,332 new and existing homes sold in June was a 30% increase over May, but down -28% YOY.
So why the big jump? PRICE. According to Dolores Conway of USC's Lusk Center for Real Estate, "prices are down far enough now that people who have been sitting on the sidelines are now jumping back in." The median SFR price is now down to the lowest it has been since October 2004, falling to $429,000. As one agent says, "The bargain hunters have come out in force."
In addition to price, there are increasingly large amounts of foreclosure properties available on the market. New condominium projects are STILL being built and coming on to the market, some at steeply discounted prices. The flipping dream remains, with buyers increasingly looking to buy and rent out their condos. Finally, gas prices are compelling buyers to seek properties (these days, mainly condos) closer to urban centers. The lower dollar has attracted foreign buyers. These are all factors in the bounce.
According to Bill Toth of Windermere/Bill Toth Associates in Burbank, "the market improvement always starts at the bottom, when properties become more affordable and people who has sat on the fence jump in. That's what we're starting to see now."
But it's not just the bottom-of-the barrel scrapings that are getting sold. Near waterfront condos in Long Beach are "selling briskly" and starting around $500,000.
Foreign buyers have been buying condos in Marina del Rey.
Properties near major sources of transportation are doing relatively well. Thanks to the Gold Line, the Pasadena market has enjoyed a bounce.
Rents are still edging up, and investment buyers have been coming out and buying condos because they can rent them out more quickly now. Conway at USC says there isn't a whole lot more room for prices to fall to return to the historical norm of being in line with monthly rents. "The cost of home ownership is starting to approach the cost of average rent."
-------------------------- SFR ----------------------------------
COMMUNITY ZIP June %YOY June %YOY
Sales Change Price Change
L.A County 3,332 -28% $429,000 -25%
El Segundo 90245 7 -30% $675,000 -29%
Hermosa Beach 90254 8 -73% $1,000,000 -16%
Manhattan Beach 90266 23 -41% $1,610,000 +4%
Redondo Beach 90277 10 -23% $918,000 +7%
Redondo Beach 90278 18 -33% $806,000 +8%
------------------------ CONDO ----------------------------------
COMMUNITY ZIP June %YOY June %YOY
Sales Change Price Change
L.A. County 1,254 -4% $386,000 -12%
El Segundo 90245 3 200% $639,000 -9%
Hermosa Beach 90254 7 250% $1,035,000 +36%
Manhattan Beach 90266 5 400% $999,000 +15%
Redondo Beach 90277 20 +25% $640,000 -25%
Redondo Beach 90278 23 -28% $580,000 -21%
The most expensive homes (SFRs) in June were in Westwood 90024 (+171% YOY); Santa Monica 90402 (+23%); Malibu 90265 (+35%); Beverly Hills 90210 (+3%) and 90211 (+19%); San Marino 91108 (+32%); Hancock Park 90004 (+131%); Manhattan Beach 90266 (+4%); Bel-Air 90077 (+66%); and Marina del Rey 90292 (+11%).
The most expensive condos in June wre in Venice 90291 (+42% YOY); Palos Verdes Estates 90274 (+317%); South Park 90015 (YOY comparison not available, median price $1,100,000 on three sales); Hermosa Beach 90254 (+36%); Manhattan Beach 90266 (+15%); Beverly Hills 90211 (-20%); Santa Monica 90405 (-3%); Marina del Rey 90292 (-4%); West Hollywood 90038 (YOY comparison not available, median price $725,000 on three sales); and Rancho Palos Verdes (-17%).
The communities with greatest SFR price losses in June were Littlerock 93543 (-59% YOY); Brooklyn Heights 90033 (-58%); Koreatown 90066 (-57%); Burbank 91501 (-52%); Hollywood Hills 90068 (-51%); Signal Hill 90755 (-50%); City College area 90029 (-50%); Woodland Hills 91364 (-48%); La Habra 90631 (-47%); and Lancaster 93535 (-45%).
The communities with the greatest condo price losses in June were Westlake 90057 (-52% YOY); Canoga Park 91304 (-50%); Covina 91722 (-50%); Palms 90034 (-45%); Gardena 90247 (-44%); Long Beach 90814 (-43%); Tujunga 91042 (-42%); Phillips Ranch 91766 (-41%); Windsor Square 90020 (-41%); and Canyon Country 91351 (-39%).
Wow, it almost sounds like 2005 or 2006 again, doesn't it? YOU WANNABE REAL ESTATE MOGULS NEED TO BUY YOUR INVESTMENT CONDOS AND RENT 'EM! Little mention of tighter credit conditions except that conforming loan limits were raised. No mention of the tidal wave of foreclosures that has YET to hit California (catch up on Mr. Mortgage's reports if you have not done so.) One month of good sales and Happy Days Are Here Again. Chris Thornberg? Who's he? It's not until the very last paragraph of this article that Conway mentions any possible alternative scenarios with a negative outcome - "If the bottom falls out of the economy and we have significant job losses, then everything will come down: home prices, rents, everything. That could take quite a while to work through."
It sounds to me like this decline has ushered in a whole new wave of suckers who have conveniently forgotten that many of the foreclosures sitting on the market now were once bought by starry-eyed wannabe homeowners who bought at the same prices back in 2004 and after. And there are still some "stupid" mortgages available (I've discussed in previous postings the FHA loan specifications I've seen floating around my neighborhood.)
By the way, if you subscribe to Elliott Wave publications, then you'll know that in a recent Financial Forecast, it was reiterated that foreign buyers are often the ones left "holding the bag" in asset markets (with real estate being the focus of the moment). The locals usually have more of an advantage. The recent EWI Finanicial Forecast warned that "As the thirst for cash becomes all-consuming, the bath water, the baby, the tub, the bathroom, and the whole house will be made available for sale; that is, if the house is worth anything. That is why it is important to resist the too-early urge to snap up assets with even the most impeccable credentials." And why the thirst for cash? The catalyst according to this recent issue is that hedge funds have been facing withdrawals, although tightening credit conditions has been a general factor.