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.


Blogger Scott said...

"95% reduction from peak" So a home selling for a million in 2006 will sell for $50,000 in the next few years?

10:11 AM, February 15, 2009  
Blogger bearmaster said...

Yes, but I am not inclined to think this will be neatly wrapped up in a few years.

And only in a different kind of socioeconomic context.

Better read this.

6:35 AM, February 17, 2009  

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