Saturday, February 28, 2009

Daily Breeze: Los Angeles County jobless rate is now 10.5% - think that'll affect housing prices?

The January jobless rate increased from 9.2% in December to 10.5%. This is the highest since 1993, when Southern California was being battered by our previous housing downturn. This is also "the largest jump in history. Employment peaked in December of 2007. And it's been basically going down hill ever since," according to California's Employment Development Department representative Patrick Joyce.

The only sector to gain jobs was government, with a measly 300 positions. I have no idea what kinds of government jobs those are. Everything else, including education and health services, showed declines.

Just a few short years ago industry experts were claiming that employment in Los Angeles remained solid so we wouldn't see the housing problems that San Diego, Las Vegas, Phoenix, and Miami were having. I'll repeat a quote from Dolores Conway of USC's Lusk School of Real Estate, which appeared in the Los Angeles Business Journal in July 2008. (It's relatively recent, but at least she was considering a scenario in which events would continue to spiral downward):

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.

If you've been watching the global economic fireworks, you may be well aware that economic projections forecasting continued deterioration usually end up being revised, frequently very substantially. Notice this July 16 Daily Breeze headline which projected Los Angeles County unemployment to hit 6.2%. In December we hit 9.2%. How off the mark was that?!?

Read the current story here.

County unemployment hits 10.5%

Friday, February 27, 2009

Daily Breeze: South Bay home prices continue downward slide

Muhammed El-Hasan at the Daily Breeze reported on South Bay home prices today, saving me work (thanks Muhammed!).

The story sub-headline notes:

Median decline is smaller than in rest of county but is part of trend.

I detect just hint of desperation here, not by the author of this story so much as for whom he is writing. Everybody wants to think this spiral downward is affecting everybody else's homes, in other parts of Los Angeles County, California, and the nation, but not theirs.

Realtor Adolph James was interviewed for this story and he is being honest. He notes that in the client area he serves, around Mira Costa High School, the typical number of listings he would have for January is maybe 10 or 12. This time it was about 40.

He's still looking for a bottom, only this time it's been pushed out to mid-2010. One of my bottom-hunter rules is that the industry has to stop looking for a bottom before I'll start looking for a bottom.

James says "we've had years where [real estate] has moved 13, 14, 15% [in one year]. We're giving it back now." If blog readers have seen my recent Redondo Beach charts, you'll notice we've had recent years where the median price has shot up in excess of 30%, not just 15%.

Sales have been so bad that many areas in the South Bay have been left off the statistics, because they didn't generate the minimum number of sales.

Click on the image to read the whole story.

Thursday, February 26, 2009

Update on the Foundry; civil unrest prediction updates

I got an email tonight from Standard Pacific that says they sold over 20 homes in the first four days of showing (out of 87 homes). That is a slightly brisker pace than I was expecting, but by no means was I expecting these units to go unwanted. There are still lots of falling Ginzu knife shoppers out there.

 Homebuyers Across the South Bay and Beyond Agree -
The Foundry is the Smartest Move in the South Bay!

Dear Susan,

We told you last week that The Foundry in Torrance is unquestionably the South Bay's 
best value, offering more quality and style for the price than anything else in the 

Homebuyers across the South Bay and beyond must agree as over The Foundry Courtyard 
Rendering for Web2500 visitors have toured the model homes since our Grand Opening 
last Saturday and over 20 homes have been reserved in that same short time!  
Unbelievable, but true!

The real magic of The Foundry is in the details, beginning with contemporary 
kitchens featuring java, cognac or white cabinetry and sleek granite countertops 
with decorative full tile backsplashes that are designer-selected for each home. 
Gourmet touches continue with a complete collection of stainless steel Whirlpool 
Gold appliances, including refrigerator with ice-maker. Equally stylish are master 
baths with stone slab countertops and tile showers and secondary baths with marble 

A true urban oasis, The Foundry overlooks Wilson Park, a 40-acre natural wonder, 
where fresh produce and flowers are found at the twice-weekly Farmers Market.

Adding to the appeal of this cool new address with prices starting in The Foundry 
Courtyard Rendering for Web2the low $400,000s, is a fantastic package of grand 
opening extras that Standard Pacific Homes is offering free to all homebuyers for a 
limited-time, including a Whirlpool Gold stainless steel refrigerator, Whirlpool 
Duet Sport washer and dryer, a custom window covering package and a custom flooring 

To join in the grand opening celebration at The Foundry, travel the 405 Freeway and 
exit southbound on Crenshaw Boulevard. Continue to Jefferson Street and turn left. 
Models are open daily from 10 a.m. to 5 p.m., except Mondays, when models are open 
at 1 p.m.

Additional information is available by calling (310) 222-8765 or visiting

We look forward to seeing you soon. 

Eric and Kayla
The Foundry Sales Team

Civil unrest updates:

Mike Morgan blogged today about"unbelievable spikes in crime" to hit when the weather warms up. Take note.

Jim Rogers has (probably) been watching the videos and slideshows of anti-porkulus protests, and he also has been weighing in on the possibility of riots.

Jim Rogers on civil unrest in the United States

None of this means, of course, that there will be a riot hitting the beach cities or South Bay next week. That is highly unlikely. If you haven't read it, see my post from earlier this month.

When you have 30 minutes of free time, kick back and watch this Twilight Zone episode "The Shelter" for a sample "worst case" civil unrest scenario:

Twilight Zone - The Shelter

Saturday, February 21, 2009

Standard Pacific's Foundry Open House

We went and took a model tour of The Foundry at 10 AM today and I thought I'd share my impressions.

First of all, between these units and whatever is planned at 360 South Bay, the Foundry stands an infinitely better chance of succeeding. Standard Pacific's Foundry is targeted to a demographic in a way very similar to the way West Millenium's Parkview Court was targeted - to older (maybe wealthy) retired Asians who would view the close proximity to the local Korean Presbyterian church, Wilson Park, and the Farmers Market as hugely desirable amenities. In addition, open house is coming at the best time of the year, on the eve of spring buying season. I don't like condo marketing brochures that use the word "cool" and unfortunately, The Foundry's marketing brochure contains it, but in spite of that, there is a demographic in place that may enable the project to succeed in spite of itself. 360 at South Bay, on the other hand, has been trying to pass itself off as Manhattan Beach property or El Segundo property (along with ridiculously steep prices) when in fact it is in Hawthorne - this is a disaster brewing unless the builder greatly overhauls its plans.

Anyway, back to the 10 AM Foundry open house. There was a modest group of people right there at opening time, mainly of Asian background, ready to take the tour. I observed a mix of some young adult singles, some young couples with small children, some older people.

My significant other said that when you walk around outside the units in the hallways it "feels like a hotel." We checked the lighting fixtures and were relieved to see that at least there were compact florescent bulbs in them. (Someday maybe I'll tell you the story about how we had to persuade our condo association to use them in order to cut our electric bill - this was back in the early 90's.)

There are eight plans: A, A with mezzanine, B, B with mezzanine, C, C with mezzanine, D, and D with mezzanine. The mezzanine units have high ceilings and a tight spiral staircase leading up to a loft. The realtor thought there were 7 A-mezzanine, 1 C-mezzanine, and 2 D-mezzanine units (I don't recall B-mezzanine). The C and D-based plans have office space. In some of the units (I think it was model C), the office can be closed off with sliding glass shoji-screen style doors. I don't recall if the offices in model D could be closed off that way. Model D units come with 2 decks, the remaining have one deck.

The mezzanine units generally have more light, but the lofts above didn't particularly impress me. The extra light was probably due to the higher ceilings and extra window space. Generally I tend to be rather suspicious of high ceilings due to the potential for wasting energy on heating up space I don't really use.

Overall, these are efficiency units, which are not necessarily bad if you are an older retired lady, gent, or maybe an older retired couple living alone. I've lived in a few apartments not much smaller than that of plan A. There isn't a lot of space in the living room for, say, working out, and the place doesn't come with a gym room (though there is a lap pool). I do like how in the master bathrooms the toilets are separated off from the rest of the bathroom behind a closed door. All homes have 2 bedrooms and 2 baths and come with Whirlpool appliances. And some of the units do get views of the courtyard or the Farmers Market area or even Palos Verdes - something besides the roof on top of Parkview Court.

The other day I griped about $200 a month HOA fees as being steep. Well, expect to pay $317 to $363 a month to do the gardening around this place, maintain the elevators, change the occasional lightbulb, sweep the hallways (there's LOTS of hallway space here, virtually all of it not in front of your unit!), and maybe clean the pool.

The realtor giving us the tour did mention tax credits but also mentioned that there are some caveats to the credit - that you have to live in the place a certain amount of time, etc, to avoid having to pay back the credit. And Standard Pacific has gone out of its way to discourage speculation - a buyer must sign contracts agreeing to live in the unit at least two years initially. They are encouraging the building of a community, she said.

What blew my mind is that she also mentioned how Village on Oak, a juxtaposed Standard Pacific project, is planning to build the Laurel division in 2010 and 2011. Yes, Standard Pacific is still planning to build more units!

The Foundry signage outside says "From the high $400,000's" but the pricing information given to me, hot off the press, was as follows.

Feature      A      A       B       B       C       C        D       D 
w/mezz w/mezz w/mezz w/mezz
Sqft 1096 1243 1290 1462 1469+ 1619 1517 1681
Price $379K $432K $412.5K $472.6K $445.1K $490.9K $465.1K $542.3K

So they shaved a tiny bit off the low-end asking price.

I sensed substantial interest from my fellow tourists. One lady sounded disappointed that nobody would be allowed to move in until after May 1.

Overall, I left feeling slightly underwhelmed. Though I doubt there will be bidding wars, the units will probably sell over time. (We noticed when we left an hour later that the crowd of tourists had thinned out substantially after that initial 10 AM rush. When we toured Village on Oak Acacia and Bayberry a few years back, there was a more consistent trickle.) The major problem is price. You know how I feel about price levels here in So Cal so I won't go there. Then there is the steep HOA fee for stuff that doesn't affect you. Then there is the density. There are 86 attached homes. When I am renting a relatively cheap apartment I can accept living like an ant in an anthill, but I wouldn't want to be on the dock for something in the neighborhood of half a megabuck for that privilege, even though we go to that Farmers Market across the street every Saturday morning. But not everyone feels that way. To each his own.

Friday, February 20, 2009

Redondo Beach median price data from January 2002

First I want to tell readers that I will NOT be going into work (UCLA) on Saturday the 21st after all. So YES, I will be going to the grand opening of The Foundry, as it is right there next to the Torrance Farmers Market, where we go every Saturday morning. Hope to maybe see a few bubble blog readers there.

A blog reader has asked for data for other cities, and I poked around on CAR's website and found this housing data link. You'll find Excel workbooks (and html pages) of median prices by California city for each month of 2008, 2007, and 2006.

In addition, where it says "CITY MEDIAN HOME PRICES", there is a master workbook with data going back to January 2002. I took a look at it tonight to see if I could put a chart together for Manhattan Beach, but for some reason several of the recent home values (for example, December 2008) were simply filled in as N/A. When you go back and look at the California city chart for December 2008, you'll see that Hermosa Beach, Manhattan Beach, and El Segundo do not even appear on the chart, which could explain the N/A for Manhattan Beach in the master workbook. I do not fully understand the absences on the December 2008 city chart, since the Los Angeles Times zip code chart showed some data for SFRs and condos in Manhattan Beach 90266. Perhaps there is a requirement that a certain minimum number of units be sold before the data makes it on to the city chart. There is no explanation given on any of these charts, so I am left in the dark.

Statistically it would make sense that a certain number of housing units have to be sold before you can calculate a meaningful median price. (This has been my major gripe about the Los Angeles Times zip code charts - but hey, they've got to report something!) The scary thought is that if the housing market were to slow down so much that nothing registered statistically, what are these reporting agencies going to do, publish charts full of N/A's? Since the spring buying season is around the corner, I'm not expecting this to immediately be a problem, but...

In spite of these problems, Redondo Beach data is alive and well. There were no problems at all scraping out data from January 2002. I am republishing these charts so you'll be able to see better the tremendous runup we've experienced here.

That's all for now. Hope to see some of you in Torrance at the Foundry on Saturday morning!

Thursday, February 19, 2009

2008 Redondo Beach Short Sales

2008 Redondo Beach short sales, compiled from data out of Zillow, Manhattan Beach Reporter, and Los Angeles County Tax Assessor. Dates are approximate. Zillow and MBR data do have inaccuracies, plus I may have introduced more errors so the accuracy and completeness of this data are by no means assured.

2008-01-07 2005-09-15  -15%  1902 Spreckels Lane
2008-01-21 2005-10-15   -5%  1717 Clark Lane
2008-01-21 2007-08-29   -7%  1801 Felton Lane
2008-01-22 2006-11-15   -7%  2702 Carnegie Lane
2008-02-01 2005-03-31   -3%   911 Beryl Street
2008-02-08 2004-08-06  -14%  2403 Voorhees Avenue
2008-02-14 2005-03-08   -8%   514 N. Francisca Avenue
2008-02-18 2004-05-19   -2%   315 Pearl Street
2008-02-18 2005-08-12   -3%  2807 Carlsbad Street
2008-02-26 2006-04-15  -32%   440 Calle Miramar
2008-03-03 2005-12-09  -11%  1524 Carver Street
2008-03-14 2005-10-15  -15%   625 Esplanade
2008-03-17 2005-03-15   -6%   208 Camino Real
2008-04-07 2005-12-13  -16%  1030 Avenue A
2008-04-08 2005-09-15  -13%  2110 Vanderbilt Lane
2008-04-09 2005-06-15   -4%   108 S. Francisca Avenue
2008-04-15 2007-11-27    0%  1810 Grant Avenue
2008-04-21 2005-07-15  -27%  1206 Rindge Lane
2008-04-24 2007-11-06   -6%   410 N. Paulina Avenue
2008-05-05 2006-06-30   -1%   320 S. Broadway
2008-05-08 2004-08-20  -19%   212 Avenue A
2008-05-12 2005-09-15   -6%  1617 Wollacott Street
2008-05-12 2006-11-15   -8%  2916 Gibson Place
2008-05-14 2006-11-15  -10%   234 S. Guadalupe Avenue
2008-05-23 2005-09-28   -3%  1114 Harper Avenue
2008-06-03 2004-11-15   -9%  2207 Perkins Lane
2008-06-04 2005-02-01  -21%  2209 Warfield Avenue
2008-06-12 2007-03-07  -47%  1709 Perkins Lane
2008-06-16 2007-01-03   -2%  2512 Vanderbilt Lane
2008-06-16 2005-05-12   -8%  1509 Stanford Avenue
2008-06-16 2006-04-15  -44%   807 N. Lucia Avenue
2008-06-16 2006-07-15  -11%  2120 Dufour Street
2008-06-19 2006-09-15  -42% 18403 Mansel Avenue
2008-06-23 2006-08-15  -14%   112 Via El Chico
2008-06-23 2007-03-14    0%  1709 Goodman Avenue
2008-06-30 2005-11-15  -15%  1219 Ynez Avenue
2008-07-03 2003-07-15   -3%   404 Avenue G
2008-07-07 2007-02-21   -1%  1636 Goodman Avenue
2008-07-07 2008-01-28  -23%   419 Anita Street
2008-07-14 2007-03-28   -6%   200 S. Catalina Avenue
2008-07-18 2005-05-13  -21%  2408 Phelan Lane
2008-07-18 2005-09-27   -9%  1516 Ford Avenue
2008-07-21 2004-04-29   -2%  2110 Rockefeller Lane
2008-07-21 2005-08-16  -29%   510 The Village
2008-07-23 2005-11-15   -6%   531 Esplanade
2008-07-28 2005-11-15  -10%  2109 Plant Avenue
2008-07-28 2005-06-17   -5%  2317 Harriman Lane
2008-07-28 2004-04-15   -1%  2503 Rindge Lane
2008-08-04 2004-10-15    0%   102 N. Irena Avenue
2008-08-04 2005-09-15  -26%  1702 Harper Avenue
2008-08-04 2006-03-21  -27%  1506 Harper Avenue
2008-08-08 2004-09-15   -1%   506 N. Helberta Avenue
2008-08-14 2006-02-15   -3%  2002 Nelson Avenue
2008-08-15 2006-01-01   -9%   650 The Village
2008-08-18 2005-06-15  -31%  2615 183rd Street
2008-08-21 2005-11-09  -42%  2408 Rockefeller Lane
2008-08-25 2005-09-23  -39%  1633 Steinhart Avenue
2008-08-27 2005-05-18  -27%  1920 Gates Avenue
2008-08-28 2007-04-05    0%  1301 S. Catalina Avenue
2008-08-29 2005-12-09  -20%   110 S. Guadalupe Avenue
2008-09-08 2005-11-15  -13%  2006 Plant Avenue
2008-09-22 2006-06-15  -11%   720 Meyer Lane
2008-09-22 2005-02-15  -27%  2518 185th Street
2008-09-22 2004-09-15    0%  1728 Ruxton Lane
2008-09-29 2007-02-27   -9%   620 The Village
2008-09-29 2005-03-15   -7%  1611 Wollacott Street
2008-09-29 2005-09-15  -15%   824 Camino Real
2008-09-29 2004-12-15   -6%   506 N. Lucia Avenue
2008-10-07 2005-05-17   -4%  2402 Graham Avenue
2008-10-10 2008-03-05  -30%   754 Avenue A
2008-10-13 2006-09-15    0%  2409 Spurgeon Avenue
2008-10-13 2005-03-15  -23%   620 N. Paulina Avenue
2008-10-17 2006-02-15  -22%   900 Camino Real
2008-10-20 2006-03-15  -24%  1638 Harper Avenue
2008-10-27 2006-10-11   -2%  2224 Plant Avenue
2008-10-29 2006-11-15    0%   803 Emerald Street
2008-11-03 2005-07-15   -4%   208 S. Irena Avenue
2008-11-03 2006-04-15  -19%  1720 Wollacott Street
2008-11-03 2005-08-15  -35%  2604 Harriman Lane
2008-11-04 2006-07-15  -20%  2317 Huntington Lane
2008-11-04 2007-07-30  -10%   606 Avenue D
2008-11-14 2004-05-15   -2%   218 N. Lucia Avenue
2008-11-24 2006-07-15  -12%  2904 Blaisdell Avenue
2008-11-24 2005-11-15  -22%  1709 Perkins Lane
2008-11-24 2006-06-15  -13%  2208 Earle Court
2008-12-01 2006-09-15  -27%  2607 Ripley Avenue
2008-12-08 2007-03-16  -15%  1207 Harkness Lane
2008-12-14 2005-11-08   -7%   314 Avenue F
2008-12-14 2008-06-03    0%  2207 Perkins Lane
2008-12-18 2007-08-21  -12%   710 Elvira Avenue
2008-12-19 2006-10-15  -16%  2703 183rd Street
2008-12-23 2006-07-20  -57%   911 Emerald Street
2008-12-24 2004-08-11  -18%   220 S. Prospect Avenue
2008-12-31 2004-05-28   -2%  1720 Rockefeller Lane
2008-12-31 2007-06-19   -4%   405 Sierra Vista Drive
2008-12-31 2004-04-22   -5%  2603 Gates Avenue

Click the link below to view the map. As you can see there is a LOT more short sale activity than real foreclosure activity ongoing. Maybe I am imagining it, but the Golden Hills section (in the south part of North Redondo) seems to be especially dense with short sales - that area also seemed dense in the foreclosure maps of distress.

View Larger Map

Tuesday, February 17, 2009

CAR/DQNews 2008 Summary for Redondo Beach

I've pretty much got my listing and sales database caught up, just in time for the deluge of spring listings.

However, I'm desperately trying to strike a balance between 1) blogging, and 2) life, so keep in mind that I'm not intending to blog nearly as much as I used to.

Also, it's pretty indicative that all is Not Well when Shorewood, the biggest realtor in the area, has not taken the effort to post sales data on its website since July 2008 sales - and that was in October, after I did some mild nudging. I have a cordial relationship with their data person, who unfortunately has been very ill. But you'd think his company would offload his responsibility on to somebody else to keep its website up-to-date.

Since Shorewood's data is not so readily available, I won't for now be publishing preliminary monthly estimates and then comparing them to Shorewood's data later in the month. Unless the company's data becomes available again and I end up with tons of free time...

Anyway, here are the charts summarizing median price activity for Redondo Beach across 2008. My significant other made some interesting comments about these charts last night. He noted the initial double top in 2005, then an initial decline in 2006 and then the "blow off" in 2007, followed by a decline and the relative leveling off in 2008. I surmised that the 2007 blowoff top was due to the decline in the sales of lower end properties while sales of higher end properties merrily continued, thus inflating the median price. In 2008, there was a bit of to-and-fro, back-and-forth price activity, but after initially punching through to nearly $650,000, there was rather steady price support at the $675,000 level. The leveling off in 2008 is causing the YOY line, in turn, to climb upwards again.

The double top in 2005 shortly followed the beach cities inventory to sales ratio bottom (indicating very tight inventory). The ratio bottomed in late spring or early summer 2005. I derived that ratio from Shorewood inventory and sales data, but I won't resume publishing it unless Shorewood data comes back to life.

I regularly see short sales at 2004 price levels (2008 short sales will be the topic of my next post.) Now the question on everyone's mind is - where do we go from here? Will President Porkulus save the day and encourage the falling Ginzu knife shoppers to foolishly continue living beyond their means and overpaying for real estate? Will valuation reality be delayed another few years?

By the way, California Association of Realtors (CAR) redid its website last year, and its link system makes a heck of a lot more sense now. I encourage you to check out the CAR newsstand. You can find 2008 historical prices for cities in California by following the link structure

Where xxx is the three letter abbreviation of a month.

Monday, February 16, 2009

Beach Cities maps of distress

RealtyTrac has improved its mapping capability somewhat since the previous (and first) time I posted maps of distress. Now, instead of saying Too many properties on map when it gets overloaded, it gives a summary count of distressed properties in each area.

I did a rather sloppy incomplete job the first time I posted these maps, ignoring extreme south Redondo Beach. So now I think these pretty much cover El Segundo, Manhattan, Hermosa, and Redondo Beach.

I don't think there is really any truly up-to-date freely accessible foreclosure tracker out there. Not that it's really the fault of any of these tracker companies. I just spent my Valentine's weekend getting caught up on listing and sales data from September, and the information, to put it mildly, is in chaos. Manhattan Beach Reporter often makes errors printing sales price data, and I constantly have to check it against Zillow, which has a whole mess of problems on its own.

It would be nice if these maps also showed short sales, which are also a form of financial distress, though not as severe as foreclosure.

El Segundo

El Segundo appears to be holding very steady compared to the other beach cities.

Manhattan Beach

Note the area north of Artesia, west of Aviation, east of Sepulveda. This is probably the *worst* section of the city and it may be starting to show. I've been reading reports in the local papers about crime in this area too.

North Redondo

TRW tract is now problem free - do I believe that? That happens to be my favorite section of north Redondo, just a few blocks away from me. Perhaps it is a more stable area, not as flipper-prone. However from reviewing the listing and sales data I have noticed this pricing scam where somebody buys a distressed property at a reduced price and then tries to sell it at a pumped up price with a blueprint for constructing a new house. There's one of those in the TRW tract and I've seen this happen a few times now.

Hermosa - Redondo

The south end of north Redondo is obviously a problem.

South Redondo (Avenues)

South Redondo - Torrance (Hollywood Riviera)

I would argue that in terms of distress density, north Redondo is continuing to lead the way and probably will remain so, as there have always been (as long as I can remember) some truly shabby areas.

Here is Lawndale, for comparison. This area is immediately east of the area shown on the north Redondo map:

Sunday, February 15, 2009

Beach Cities - a repeated warning

First of all, I hope you are a regular reader of Mr. Mortgage. I consider him one of the top reliable authorities on the state of the real estate market here in California. He is in the process of relocating his website so make sure you are on his email list if you aren't already. When his new website is up I will update the link I maintain in the sidebar.

Second, I have added a new link to the sidebar Mike Morgan: Behind Enemy Lines. I strongly suggest that you bookmark it and check it frequently. Mike Morgan is a Florida realtor. I consider the information he publishes as high quality as that of Mr. Mortgage or that of Karl Denninger of Market Ticker.

Change in how homebuyers perceive value

One opinion I have stated on this blog repeatedly (I am a bit of a nag about it) is that psychologically, what a homebuyer perceives as being valuable and worthwhile in a property changes between housing boom and housing bust. The amenities and features of a property that a homebuyer thought nothing of paying for in 2005 or 2006 can turn into liabilities during a downturn. Few upscale condo buyers were put off paying $200 a month or more in HOA fees while condo values were zooming up 20% or more a year. Maybe living in the McMansion with the running-water fountain in the front yard, the new kitchen granite countertops, and the energy wasted with all those tiny incandescent bulbs lighting the fortress was no big deal - the home was appreciating 20% a year, the 401k was doing OK, and the owner "felt" rich, so why not!?! In a downturn a market participant's idea of what constitutes good value will change. This change in perception can and will add further pressure to prices. Price levels are ultimately driven by psychology.

Social Unrest and the potential impact on property values

Read Mike Morgan's recent post on Turbo Tax Cheat Timmy in which he states that the United States "could see riots" this summer, and his post Obama Deal with Family A, B, and C in which he opines that what is going down in Washington right this minute is a "recipe for violence."

Another opinion I have stated a number of times in this blog is that an incredible backlash could accrue against those living ostentatious, consumptive, affluent lifestyles and now there are industry experts out there saying the same thing. IF such a backlash does erupt and manifest itself as violence in the area, then by logical extension that backlash will eventually reach out and adversely impact the beach cities. I cannot reach any other conclusion.

My September 10, 2007 post Stage being set for social unrest may be worth reviewing. If we are truly headed on this path toward civil unrest, then I sure as heck don't want to snap up a bubbleminium at 40% off the peak price this spring thinking I got a "bargain." Ideally I would want to be as far away as possible from such properties and continue looking like just another poor slob sitting on the bus on my way to work.

On a lighter note, today I took these photos of the Foundry in Torrance. I moved the camera from west to east. On the far left of the second picture you can see the Parkview Court project, and in the background of the last photo you can see the back of the Village on Oak project. I am glad I periodically rant and rave about social armageddon coming our way, because it continually forces me to reconsider what these sparkling new construction projects are really worth.

Thursday, February 12, 2009

Catching up on South Bay residential development projects

I figure the South Bay, specifically the beach cities area, is about 18 months to 2 years behind the rest of California and the nation psychologically in terms of how the real estate crash is progressing. Remember that just a few short years ago we were hearing that prices would never correct more than 10 or 15%. Well we've had that and more. Even now, some are still saying that prices will never crash here. To that I say, "We shall see."

Overall, I still sense denial. I think many are somehow hoping the new pork that's being passed in Washington will somehow trickle down and encourage yet another wave of suckers to buy still-overpriced real estate. And if that happens and we get some kind of price flattening, I expect that any real correction will be delayed another year or two. I've heard stories about how Florida banks holding foreclosures are refusing to cut prices in the hopes of somehow benefiting from pork money. The California state legislature has put off cutting spending because it is holding out for pork.

I am trying to catch up on the state of various development projects. One blog reader alerted me to this September 19, 2008 Daily Breeze story by Kristin Agostoni - "Work likely to resume on RB complex", which I will reproduce here in case the story vanishes. Note the date on the story - that was when the financial markets were embarking on major turmoil, and the full impact had not yet been felt:

Contractors vanished several weeks ago from a partially built senior-housing complex 
in north Redondo Beach, leaving behind a hulking structure covered in scaffolding.

The sluggish real-estate market has led to delays for The Montecito, a 48-unit, 
four-story development of homes and ground-floor retailers at the busy intersection 
of Artesia Boulevard near Green Lane.

Less than two miles away on Ruxton Lane, the same can be said for a nearly finished 
complex of 27 town houses that was put up for auction this week.

The company developing The Montecito, Watt Communities of Santa Monica, expects to 
see construction resume by early next month, ending a work stoppage that began 
roughly six weeks ago, said Webb Parker, the company's vice president of sales and 

"We have to offer these homes at lower prices than we've planned on," Parker said 
last week. "We just had to restructure all of our financing on the property.

"We've been delayed. We've been delayed like every other builder, and the market has 
contributed, unfortunately," he said.

The development company says its move-in schedule has been pushed back to March as 
officials renegotiated the financial package with their lender. The units could start 
selling in November or December, he said.

Parker declined to elaborate on the terms of the deal. The lowest-priced condos - one 
bedroom with around 900 square feet - will likely start around $410,000, while a few 
years ago they were expected to sell in the $500,000 range, he said.

The Montecito - which will offer a mix of one- and two-bedroom units, some with dens 
- was approved in 2004 for buyers 55 and up, with the provision that five of the 48 
units are set aside for low- to moderate-income buyers.

"We're kind of excited about it now that we got it worked out," Parker said.

Councilman Steve Diels, whose district includes the structure rising across from the 
north branch library, said he's been told the owners have on-site security and that 
the Fire Department patrols the property.

"My main concern was to make sure it remains safe, because right now it looks like a 
vandalism target," he said.

While The Montecito is back on track, it is unclear what the future holds for the 
27-unit project on Ruxton Lane near the Southern California Edison right-of-way.

Visible from Inglewood Avenue, the Ruxton Pacific complex of Spanish-style town homes 
has wrought-iron fencing, new walkways, grass and young bougainvillea vines. None of 
the units is occupied.

A notice of default was filed in May, records show, and the property was subject to a 
foreclosure sale Monday.

In brief interviews this week, Manhattan Beach developer Steve Legare said he didn't 
attend the auction but was told the property reverted to the lender, Alliance Bank. 
Officials there could not be reached.

The units weren't selling even when the prices dropped, Legare said. A news release 
from March advertises the three-bedroom, 2.5-bathroom homes at $679,000, "a savings 
of up to $70,000 off the original prices," it states.

Ruxton Pacific is "99 percent done," Legare said.

"It was a good project. We just ran out of money. We tried to sell them, and at the 
time they didn't sell." 

"It was a good project but they didn't sell" ?!?? Huh?

Now here is the best I know about these projects.

The Foundry (Torrance)

According to the email notice I got today, there is an open house on February 21. Normally we go to the Farmers Market on Saturday mornings and so we'd be right there for open house, but on that one particular day I may have to go in to work at UCLA for a "radiology retreat." So unless something otherwise changes I am not planning on attending. If that changes I'll say so.

I can tell you that this project seems to have taken forever to complete, with the wood frames exposed to the weather for quite a while. Like other projects I consider it is way too packed in for my taste and I still consider it overpriced.

Cool Homes. Hot Buy.
The Foundry on 2/21.

Dear Susan,

The good times are just getting started at The Foundry in Torrance, where beautiful 
model homes and a gracious courtyard will open for oohs and ahs on Saturday, February 

Come see an utterly chiconomic collection of hip homes priced from the The Foundry 
Rendering 1 for Weblow $400,000s.  That's right-we're serious- the low $400,000s for 
a new home in a desirable South Bay location. Included designer details- kitchens 
with stainless steel appliances, sleek granite countertops and full tile 
backsplashes. Baths with cool brushed nickel fixtures.  Cabinetry and doors with the 
perfect urban brushed nickel hardware.  Even the interior and exterior light fixtures 
are fun!

A study in style and innovation; all homes have two spacious bedrooms and baths. Some 
homes also include room for an office or guests, and some top-floor homes have a 
dramatic mezzanine and spiral staircase.

Come see for yourself and visit The Foundry Grand Opening on 2/21!

Eric and Kayla
The Foundry Sales Team

360 South Bay (Hawthorne)

Here was the state of things a year ago. At that time there were a few structures on the land that was otherwise left as one big dirt wasteland:

My post from a year ago

And here's an insightful comment a year ago from a beach cities realtor about this awful project:

Insightful commentary

To tell you the truth, I haven't been paying attention to what has been happening to the land, but did notice recently that it looks like some foundations are built. I have no idea how long they've been there. I checked the website and nothing seems to be different.

Villa Allegra (Westchester)

I think these were originally supposed to launch in 2008. The website now says spring of 2009, with prices starting in the $800,000's.

Luxury townhomes right up against Sepulveda Blvd, in Los Angeles Unified School District. I'm sorry,but there is no way I think these can be worth anything near $800,000!

The Montecito

More piles of box condos for the 55+ crowd.

All the website says is "Coming 2009. Pricing not yet available."

I live less than a mile directly north of this development, and it looks like it's been on hold forever.

Ironically, one of the "winners" I see in this South Bay development mess, believe it or not, is the owner of the Hawthorne mall. The Daily Breeze ran a story on February 1, 2009 - "Plans to revive old Hawthorne mall stall" - about how the owners and the Hawthorne city council have been divided for years as to what to do with it. The reason the owners could be "winning", in my opinion (if you could call it that), is because they didn't pour gobs of money into constructing yet more condos right at the real estate peak.

I have been diligently working on updating my properties database. Stay tuned.

Monday, February 09, 2009

L.A. Business Journal: Median Home Prices fall 35% in January: "Nothing and no one is untouchable"

According to a February 9 story by Francisco Vara-Orta in the Los Angeles Business Journal, the median price of a single family residence (SFR) in Los Angeles County took a "jaw dropping" 35% hit in January YOY. Condo prices fell 26%. That puts the median SFR price at $320,000, down from the $585,000 peak in mid-2007. Condos peaked at $460,000 in August 2007.

Michael Nourmand, a Beverly Hills realtor who serves the tonier westside, states "Nothing and no one is untouchable in this economic climate," then describes how six multi-million dollar escrows were lost in the days after the September financial market meltdown. He says "it's hard to nail down a figure but you are seeing about 15% softness in the Westside housing market."

In other tony areas that in boom times drew in a lot of people but are now choking on foreclosures, price drops have been steep. One area of North Hollywood has seen a median home price plunge from $1.2 million to $654,000 within 12 months.

Although Los Angeles County SFR sales came in at 3,108, down 8% YOY, in a number of markets recent sales volume has been starting to trend up, thanks to lower prices. But even the higher sales volumes are well below sales volumes during the peak years. In 2004 and 2005, Los Angeles County typically sold 8,000 to 11,000 homes each month. Lancaster is enjoying the best sales volume it has experienced in 35 years.

USC's Delores Conway at the Lusk Center for Real Estate reminds us that January is normally a very slow month and does not give an accurate market picture. She notes that unemployment is rising in the financial services industry and that the westside housing markets could see more pressure. She further adds that although there has been some correction already, "now we have the recession and unemployment putting pressure on the market. What's certain is the uncertainty."

-------------------------- SFR --------------------------------
COMMUNITY          ZIP    Jan     %YOY         Jan    %YOY
                         Sales   Change      Price   Change
L.A County              3,108      -35%    $360,000   -35% 
El Segundo       90245      2      -80%    $492,000   -48%
Hermosa Beach    90254      2      -86%  $2,380,000  +110%  
Manhattan Beach  90266     10      -55%  $1,694,000    -2%  
Redondo Beach    90277      6      -54%    $870,000   -12%
Redondo Beach    90278     11        0%    $612,000   -18%

------------------------ CONDO --------------------------------
COMMUNITY          ZIP    Jan     %YOY      Jan       %YOY
                          Sales   Change    Price     Change
L.A. County              1,030      +4%    $310,000   -26%
El Segundo       90245       3      N/A    $410,000    N/A
Hermosa Beach    90254       6    +500%    $975,000    +1%
Manhattan Beach  90266       1     -67%  $1,299,000   +27% 
Redondo Beach    90277       6     -14%    $651,000   -15%
Redondo Beach    90278       7     -61%    $710,000    +3% 

The most expensive SFRs in January were in Beverly Hills 90210 (+36% YOY); Pacific Palisades 90272 (+9%); Brentwood 90049 (+48%); Malibu 90265 (-19%); Santa Monica 90402 (-24%); Manhattan Beach 90266 (-2%); Rancho Park 90064 (+48%); Hancock Park 90004 (+28%); Encino 91436 (+28%); West Hollywood 90069 (-10%).

The most expensive condos in January were in Hermosa Beach 90254 (+1% YOY); Venice 90291 (no 2008 data for comparison); Arcadia 91006 (no 2008 data for comparison); Redondo Beach 90278 (+3%); West Hollywood 90046 (+35%); Torrance 90503 (+27%); West Hollywood 90069 (+16%).

The areas suffering the greatest SFR price losses in January were Koreatown 90006 (-66% YOY); Palmdale 93591 (-64%); North Hollywood 91602 (-62%); Inglewood 90302 (-62%); Compton 90222 (-61%); Watts 90002 (-61%); Los Angeles 90011 (-61%); South Los Angeles 90001 (-59%); Long Beach 90813 (-59%); Willowbrook 90059 (-57%).

The areas suffering the greatest condo price losses in January were Long Beach 90807 (-60%); Carson 90745 (-55%); Paramount 90723 (-55%); Encino 91316 (-53%); Azusa 91702 (-51%); Norwalk 90650 (-50%); Canoga Park 91304 (-48%); Panorama City 91402 (-47%); Van Nuys 91405 (-46%); Koreatown 90005 (-45%).

Thursday, February 05, 2009

Los Angeles County South Bay Beach Cities Real Estate $$$ Transacted through January 2009

SURPRISE! Bet you thought you'd never see these charts again, did you?!

I wish I could tell you that prices have been plummeting in the South Bay and it's time to scoop up bargains, but it ain't so Joe. I wouldn't quite use the word "plummet" to describe what's been happening. I'll know more when I look at price data in detail, but so far it looks like beach city area prices have been flat to edging down. Compared to what happened in prior years, the beginning to the end of 2008 was relatively flat.

Spring is coming and we'll definitely see a rebound in sales volume, because there are still plenty of Falling Ginzu Knife Shoppers out there. At that time I believe we'll see further price declines as higher transaction volume will give us more honest pricing and more homes marked to market.

In case you missed it, check out the Los Angeles Times' Peter Hong's February 2 article "L.A.'s Westside succumbs as housing goes south". Chris Thornburg at Beacon Economics got the dynamics absolutely right. The more affluent homeowners are initially able to hold out longer without cutting asking prices and can afford to wait, but eventually if they want to sell their properties they have to eat humble pie too.

By the way, is it just me or are we seeing more For Rent signs around? If I'm right, that's a sure sign that some sellers have been giving up and trying to rent out their properties. If the job market continues to deteriorate (and I have no reason to believe it won't continue to deteriorate) I think asking prices, rents, everything will spiral down the toilet.

Take a look at Redondo Beach sales volume. It was about 30 units in January. In January 2002 it was around 120 units. Sales volume has declined 75% from 2002. You think there are some realtors out there who are scrambling?

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.

Since 2008 was so relatively flat compared to the hyperactivity of prior years, on many of these charts you'll see the YOY line start curving up again in what looks like a rebound. Remember, 0% means that the dollar volume is unchanged from prior years.

For some areas, the line has vaulted past 0%. I suspect the areas where the YOY line has spiked up are places where the falling Ginzu Knife Shoppers have been trying to fulfill their flipping dreams or rich landlord dreams. It's known, for example, that well-heeled buyers with $1 million have been scooping up 10 houses at a time in north Los Angeles County, hoping to sell for a profit.

By the way, don't worry about reports that foreign buyers are coming in and scooping up real estate. One of the beautiful things about major deflationary contractions in asset markets is that there is no discrimination. All ethnic backgrounds and genders are treated the same, i.e., they all get burned, by golly.

Notice how even Playa Vista (90094), which defied gravity for sooooo long, is now showing substantial YOY declines.

90249         59.2%   Gardena   
90744         42.9%   Wilmington   
90505         20.0%   Torrance   
90304          4.1%   Lennox   
90746          2.6%   Carson   
90232          0.4%   Culver City   
90056          0.0%   Ladera Heights   
90277         -0.4%   Redondo Beach (south)   
90230         -3.6%   Culver City   
90034         -4.6%   Palms   
90503         -7.4%   Torrance   
90035        -11.9%   West Fairfax   
90018        -13.7%   Jefferson Park   
90043        -14.1%   Hyde Park, Windsor Hills   
90066        -14.4%   Mar Vista   
90501-90505  -19.5%   Torrance Combined   
beach cities -20.6%   4 Beach Cities combined   
90301-90305  -20.8%   Inglewood/Lennox combined   
SW county    -24.1%   Southwest L.A. County   
90401-90405  -28.0%   Santa Monica combined   
90275        -28.8%   Palos Verdes Estates   
90266        -28.9%   Manhattan Beach   
90007        -31.5%   South Central   
90036        -31.8%   Park La Brea   
90254        -32.2%   Hermosa Beach   
90731        -33.1%   San Pedro   
90291        -33.3%   Venice   
90245        -35.4%   El Segundo   
90302        -36.1%   Inglewood   
90292        -36.1%   Marina del Rey   
90278        -36.8%   Redondo Beach (north)   
90008        -38.1%   Baldwin Hills / Leimart Park   
90293        -39.4%   Playa del Rey   
90277-90278  -39.7%   Redondo Beach combined   
90247        -40.0%   Gardena   
90064        -42.6%   Rancho Park/Cheviot Hills   
90305        -43.0%   Inglewood   
90502        -44.3%   Torrance   
90045        -45.3%   Westchester   
90062        -46.1%   South Central   
90504        -48.1%   Torrance   
90717        -48.7%   Lomita   
90260        -49.2%   Lawndale   
90019        -50.5%   Country Club Park/Mid City   
90501        -51.4%   Torrance   
90745        -52.9%   Carson   
90303        -52.9%   Inglewood   
90250        -53.1%   Hawthorne   
90094        -56.1%   Playa Vista   
90732        -57.6%   San Pedro/Rancho PV   
90047        -61.0%   South Central   
90301        -63.7%   Inglewood 

Relative Strength

This is a longer-term view of the strength of dollar volume in a given zip code. For this month 5.3 is the strongest (suffering the least amount of chronic pain) and -0.3 is 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.

Note that Playa Vista remains at the top of the list. If the YOY declines persist, we'll start to see that number edge down.

90094          5.3    Playa Vista   
90247          2.8    Gardena   
90305          2.2    Inglewood   
90034          1.5    Palms   
90044          1.3    Athens   
90292          1.3    Marina del Rey   
90746          1.1    Carson   
90047          0.7    South Central   
90007          0.6    South Central   
90062          0.6    South Central   
90502          0.6    Torrance   
90302          0.5    Inglewood   
90745          0.5    Carson   
90501          0.5    Torrance   
90016          0.5    West Adams   
90293          0.5    Playa del Rey   
90018          0.4    Jefferson Park   
90250          0.4    Hawthorne   
90301-90305    0.4    Inglewood/Lennox combined   
90301          0.4    Inglewood   
90304          0.4    Lennox   
90064          0.4    Rancho Park/Cheviot Hills   
90254          0.4    Hermosa Beach   
90744          0.4    Wilmington   
90303          0.3    Inglewood   
90045          0.3    Westchester   
90008          0.3    Baldwin Hills / Leimart Park   
90019          0.3    Country Club Park/Mid City   
90291          0.3    Venice   
90043          0.2    Hyde Park, Windsor Hills   
90245          0.2    El Segundo   
90732          0.2    San Pedro/Rancho PV   
90232          0.2    Culver City   
90037          0.2    South Central   
90230          0.2    Culver City   
90249          0.1    Gardena   
90036          0.1    Park La Brea   
90260          0.1    Lawndale   
90066          0.1    Mar Vista   
90503          0.0    Torrance   
90278          0.0    Redondo Beach (north)   
90501-90505    0.0    Torrance Combined   
90505          0.0    Torrance   
SW county      0.0    Southwest L.A. County   
90035          0.0    West Fairfax   
90401-90405    0.0    Santa Monica combined   
90056         -0.1    Ladera Heights   
90277         -0.1    Redondo Beach (south)   
90266         -0.1    Manhattan Beach   
90277-90278   -0.2    Redondo Beach combined   
beach cities  -0.2    4 Beach Cities combined   
90275         -0.2    Palos Verdes Estates   
90504         -0.3    Torrance   
90717         -0.3    Lomita   
90731         -0.3    San Pedro

People have asked me how far I think the market will fall. I'll repeat my earlier prediction from umpteen years ago (gosh is this blog really over 3 years old?): from the peak, I suspect there will be a 70-95% drop. My projection includes lower transaction costs.

It is my belief that in severe contractions, the market brings about efficiencies so that market participants can more quickly and more cost-effectively perform transactions. Economic contractions aren't just about pain - we actually do get some benefits out of them. If you don't believe me, keep in mind that freight rates for containers shipped between Asia and Europe recently hit zero.

I'm not holding my breath expecting this decline to finish this year. President #44 and Kalifornicate-ia politicians are bound and determined with pork packages and legislation to kick the can up the road and delay the pain as much as possible. This will take a few years to play out.

Here is an example of what I think is still grossly overvalued. Look at this flyer for condos in Koreatown. They were originally offered at $879,000 according to the flyer. Now they are being auctioned, starting at $419,000. An earlier version of this flyer had the starting bid at $445,000. I think these would still be overvalued if the opening bids were halved. I honestly don't think the value is there unless they fall into the five figures, considering the general area, the burden of HOA fees, the likelihood that these condos aren't very green and self-sufficient in energy, etc. In other words, the fancy amenities that were such must-haves during a boom are probably now more a detriment.

By the way, use the regional tracker if you want to look up a particular zip code.