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The number of foreclosures reported by Dataquick news for Los Angeles county was reported on July 21, 2010. The number of Notice of defaults issued in the county was at  13,045 that was down 47.0 % from the second quarter of 2009. The chart below plots the quarterly activity since the second quarter of 2007. As you can see a peak appeared in the first quarter of 2009.  Because of the large size of the data we have high confidence it its ability to confirm the trend.

LA County Properties in Foreclosure – Quarterly

The chart below clearly shows why this a very reliable timing tool:

LA County Properties in Foreclosure – Annual

It is very easy to understand why this is a very important indicator based on supply and demand principles. When the Annual inventory of foreclosures is down the market will recover. The annual data based on the quarterly chart trend (first chart) is predicting 2009 will be the peak year with a lower number of foreclosures for 2010. The second chart will show lower number of foreclosures for 2010 in the future, The chart will be revised in March 2011 after the official data comes in. All this illustrates the low risk of investing in LA South Bay real estate. This must be weighed against the health of the national economy but that must be considered in every investment.

According to Mr Trump you make money in real estate when you buy not when you sell.

If you have any questions on the above please feel free to contact me.

June’s sold data has given us some conflicting data. On the positive side sales volume was the highest in four years. That was very refreshing news as sales volume has had a hard time pushing through the average of 502 units per month for quite some time. The Unsold Index remains in a very favorable range at 3.5 months even though more homes have been put on the market in the being offset by the increased sales volume. Most of our indicators are strongly positive but there is some weakness developing. On the negative side Median Home prices have broken the short term trend line and have given back most of the gain from January 2009. Rememeber these values fluctuate widely from month to month so we must rely on the trend of home prices before reaching a conclusion. Median Home price positve momentum has slowed as evidenced by our Momentum chart below, price momentum is near the zero value indicating no price momentum or that prices have stalled. There is no energy in  price momentum in either direction up or down.

Median prices receive a lot of attention by the media, beacuse of that it is an indicator to be concerned with. However it is not an indication that homes prices are going up or down only where the public is buying. It is preferable that the Median price is going up as a measure on market health. In other words the public buying more expensive homes in general is a good sign. For a more detail study see the discussion of Median price vs. Average price,

The Average LA South Bay Home price is fairing much better and remains significantly higher than its January 2009 value. I consider this measure of home price more significant as discussed in the discussion above.

The current market remains in a very healthy “balanced market”, neither a Buyer’s or Sellers’ market and remains as an ideal market for Buyers, Sellers, Investors and Agents. Most of our indicators are positive at the present time. Home Affordability remains very high due to the combination of low interest rates and low median prices. The March 2009 buy signal given here still remains the best time to have purchased in the current up cycle but we may get a similar opportunity soon. The Affordability Indicator is a best indicator to watch if you are trying to time the market than home prices if you are planning to finance your purchase.

Sentiment decreased in May and broke its uptrend line from November of 2007, June’s value remains about the same, This is an indicator for us to watch in the future for purposes of risk evaluation, but is still very positive.

City Price trends For Torrance, Redondo Beach, Manhattan Beach and San Pedro are shown at the bottom of this report with their deviations from the long term price trends.

The following conditions are supporting a market bottom and are reasons to buy now.

1 – The Foreclosures charts are indicating a peak in foreclosures, if sustained it will
provide additional confirmation of the bottom of the market. The number of new foreclosure properties currently listed for sale in the entire South Bay as of today is relatively low.
2 -The Affordability chart shows the affordability in January 2009 was at the highest since June 2003. From August 2007 to June 2010 affordability has increased approximately 52 % . This indicator is the most important indicator if you are looking to get in to the market because it is a measure of how much you can buy for your money.
3 – Properties are being absorbed in the outside areas at discounted prices as conditions are continuing to improve, see the chart below (see Murrietta)
4 – Interest rates have very little room on the downside probabilities to the upside are highly likely.
5 – High Inflation is very likely to occur within the next 2 years (See the 10 year Treasury Yield curve below), All asset classes such as real estate will increase when that occurs.
6- Most economists agreee that the national recession is over, buying confidence should increase.

Here are the reasons to wait: for a better buying time

1 – Low confidence in the national economy and increased unemployment and or negative personal income trends locally may drive down prices and/or Mortgage rates. A double dip recession  is a remains a strong probability.
2 – Low number of sales may be an issue again, if that happens the U.I. (Unsold Index) will increase resulting in a large supply of homes on the market causing prices to go down provided inventory does not decrease.
3 – Interest rates may go down further improving affordability for more buyers.
4 – Interest rates may go up higher as econcomy improves forcing prices down to a better buying opportunity. The government has stopped buying Treasury securities, that will cause all rates to go up and prices down putting pressire on prices. Fewer buyers on these securities will cause interest rates to go up.
5 – Removal of Government incentives may result in a lower number of home buyers resulting in lower home prices in the future. It looks like there is little incentives planned in the near future.

Remember to read the comments to the right of each chart below. Click on the graphs to enlarge.

Forecast
Home prices are destined to increase if the present demand trends continue in the LA South Bay. The impact of he current national economy situation and related credit issues will continue to put a negative drag on prices and the recovery in the local real estate market.

Application

In the summer of 2005 prices peaked for one month and the price trend started to level off. That was the start of a high risk time period a market down turn was forecasted. The Market Sentiment peaked at that time and started going down confirming the price peak. The sales volume also peaked and started going down. The Unsold Index was moving into the Buyers market zone. All this was forecasting a change in the market and an end to upward price momentum. Prices were relatively flat from the price peak in the summer of 2005 to the January 2007.Another price peak occurred which was an unconfirmed price peak, at a time which did not justify the continued higher prices. Most of the South Bay Home price decline occurred after the summer of 2008. The purpose of this newsletter is determine risk levels when deciding to buy or sell real estate. At present a low risk buy signal from March 2009 remains in effect.

Current Recommended Action – Low risk – Buy signal, Sellers in control market is near in most South Bay Cities. Possible risk level changes may occur in the near future.

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What is more meaningful in analyzing home prices, Median Home Prices or Average Home Prices?

The media relies very heavily on Median Prices, almost entirely, Average home prices are rarely mentioned. On the LA South Bay Real Estate blog we include both on the home price graph this is usually the top graph listed in our monthly report.

There is a great deal of controversy in the industry as to which is the more important measure of home prices.

We define Median prices as the value in which half of the homes sold above and half of homes sold below. This is more of a measure of the price segment of homes being sold not their actual value. In other words the public may be buying low end or high end homes.

Average prices is defined by the sum of the sold prices divided by the number of homes sold. The Average prices dependent on the cost of each unit price, high end or low end priced home each sale price affects it’s value.
I am in the camp that believes Average home prices is the more important indicator as far as determining the trend of real estate prices. The Median prices are an important indicator of the price segment that the public is buying.

Here is a quick analysis that was performed using Microsoft Excel which illustrate the differences.

There are six different sets of sale taken for the comparison reflecting different market conditions.

In Data Set 1 the Median is calculated at $500,000 with sales above and below $500,000. The calculated value is $500,000 and The Average value is calculated at $533,508. Each change in any of the sales prices will change the Average value. The value a #6 will be the Median as long as there are an equal number of sales above and below no matter what the actial value is.

In Data Set 2 the market was weaker with lower sales prices in the lower end the Median remains the same, which tells us very little about which way the market is moving. The Average price is down which is a result of the lower prices, we learned nothing from the Median value.

In Data set 3 the upper end prices increase during a strong market. Again the Median prices remains the same but the Average price goes up giving us valuable information.

In Data set 4 we kept the same values under the median price as given in set 1 and lowered the prices above the median price, again Median price remains the same and Average price is telling us what is happening as a result of these price changes.

In Data set 5 we increase the sold values under the median price and we get the same type of information.

Finally in Data set 6 we increased the sale prices dramatically above the median price, of course the calculated value of Median price remains the same and tells us nothing as to what the market is doing but the calculated average price tells the whole story.

Which do you think is the more important indicator? Please send your comments.

Federal Home Loan Mortgage Corporation)released the results of its Primary Mortgage Market Survey® (PMMS®) in which “the 30-year fixed-rate mortgage (FRM) averaged 4.58 percent with an average 0.7 point for the week ending July 1, 2010, down from last week when it averaged 4.69 percent. Last year at this time, the 30 year FRM averaged 5.32 percent”.

From all the research that I have gathered this appears to be the lowest rate for the 30 year FRM since the early 1960′s. Data has not been keep that long by either Freddie Mac or Fannie Mae the chart below is from another reliable source.

National Average Mortgage Rates: Historical Data 1975 to present from Mortgage News Daily

The Blue line represents the 30 year FRM trend.

This will have a positive influence on Home Affordability as long as home prices do not continue to run up to counter act these improved rates. Local rates are now in the 4.5-4.75% range. The lower rates are due to investors unease with the European economy particularly in Greece and Spain and the sluggish US economic rebound, but local buyers can benefit.

Because of these lower rates call volume to Realtors according to my fellow associates has tripled in the past 3 weeks and inventory continues to shrink, now would be a good time to take advantage of this unexpected condition.
P.S -To get e-mail with information on every home that’s currently available, daily, Click Here

Thanks again, and have a great holiday weekend.

Barry Brickel J.D.

Average Home Prices are determined by adding the sold prices of all the homes sold divided by the number of homes sold. The Average Price is dependent on the cost of each unit price, each sold price directly affects its value.

Median Home prices are defined by the price at which half of homes are sold above that price and half of homes sold below that price. Median home prices are more  a measure of the prices of homes being sold not their actual value, it shows the prices at which the public is currently buying.

These are relative values, both Average and median prices are  not direct measurements of home value.

The media relies heavily on Median Home Prices for comparisons than Average Home prices and there is disagreement in the industry as to which value is more meaningful. I  am in the camp that believes average home prices are more meaningful for the purposes of tracking home values.

Volume 7, issue 6

Summary of May’s Data

The government incentive programs have basically come to an end and the market now must prove that it can continue its current uptrend on its own. Preliminary data indicates that the current demand for housing in the LA South Bay will continue on its own at least on a moderate basis. The demand for housing continues due to an intinsic demand but we remain at the mercy of external conditions, for example, the national economy, unemployment and flat personal income gains.

May’s sales volume came in above average partially because of govermrnent incentives. At the moment moving into the stronger selling months is enough to overcome the loss of the incentives. June’s data will give us a more definitive answer to this question but as of now it looks like we can continue up. Average homes prices were up 28.1% since January 2009. We will need some additional help to keep the price momentum positive and in an upward direction.

The total number of available homes on the market was up sharply in May, but this was offset with the the higher number of sales. The Unsold Index of available homes actually went down.

The current market is a “balanced market”, neither a Buyer’s or Sellers’ market and remains as an ideal market for Buyers, Sellers, Investors and Agents. Most of our indicators are positive at the present time. Home Affordability has been sinking since the March 2009 buy signal given here. On a timing basis the best time to buy in this upleg has past at least at this time. The Affordability Indicator is a better indicator to watch if you are trying to time the market than home prices.

The media relies very heavily on Median  Home prices. This price indicator is used to evaluate market strength  it does not by itself indicate whether properties are going up or down in value and by how much. They only show  the prices at which the public is currently buying. Comparative market analysis must still be performed to determine value and price changes for individual properties.

Actual Median and Average LA South Bay Home prices bottomed in January 2009 and remain on a new uptrend.

The Unsold Index is low at 3.52 months improving last month’s value slightly an indication of a very strong market. The statewide value is approximately 5.1 months in comparison (April 2010).
Sentiment decreased last month and broke its uptrend line from November of 2007, This is an indicator for us to watch in the future for purposes of risk evaluation.

City Price trends For Torrance, Redondo Beach, Manhattan Beach and San Pedro are shown at the bottom of this report with their deviations from the long term price trends.

The following conditions are supporting a market bottom and are reasons to buy now.

1 – The Foreclosures charts are indicating a peak in foreclosures, if sustained it will
provide additional confirmation of the bottom of the market. The number of new foreclosure properties currently listed for sale in the entire South Bay as of today is low.
2 -The Affordability chart shows the affordability in January 2009 was at the highest since June 2003. From August 2007 to May 2010 affordability has increased approximately 42.5% . This indicator is the most important indicator if you are looking to get in to the market because it is a measure of how much you can buy for your money.
3 – Properties are being absorbed in the outside areas at discounted prices as conditions are continuing to improve, see the chart below (see Murrietta)
4 – Interest rates have very little room on the downside probabilities to the upside are highly likely.
5 – High Inflation is very likely to occur within the next 2 years (See the 10 year Treasury Yield curve below), All asset classes such as real estate will increase when that occurs.
6- Most economists agreee that the national recession is over, buying confidence should increase.

Here are the reasons to wait: for a better buying time

1 – Low confidence in the national economy and increased unemployment locally may drive down prices and/or Mortgage rates. A double dip recession  is a strong probability.
2 – Low number of sales may be an issue again, if that happens the U.I. (Unsold Index) will increase resulting in a large supply of homes on the market causing prices to go down provided inventory does not decrease.
3 – Interest rates may go down further improving affordability for more buyers.
4 – Interest rates may go up higher as econcomy improves forcing prices down to a better buying opportunity. The government has stopped buying Treasury securities, that will cause all rates to go up and prices down putting pressire on prices.
5 – Removal of Government incentives may result in a lower number of home buyers resulting inlower home prices in the future.

Remember to read the comments to the right of each chart below. Click on the graphs to enlarge.

Forecast
Home prices are destined to increase if the present demand trends continue in the LA South Bay. The impact of he current national economy situation and related credit issues will continue to put a negative drag on prices and the recovery in the local real estate market.

Application

In the summer of 2005 prices peaked for one month and the price trend started to level off. That was the start of a high risk time period a market down turn was forecasted. The Market Sentiment peaked at that time and started going down confirming the price peak. The sales volume also peaked and started going down. The Unsold Index was moving into the Buyers market zone. All this was forecasting a change in the market and an end to upward price momentum. Prices were relatively flat from the price peak in the summer of 2005 to the January 2007.Another price peak occurred which was an unconfirmed price peak, at a time which did not justify the continued higher prices. Most of the South Bay Home price decline occurred after the summer of 2008. The purpose of this newsletter is determine risk levels when deciding to buy or sell real estate. At present a low risk buy signal from March 2009 remains in effect.

Current Recommended Action – Low risk – Buy signal, Sellers in control market is near in most South Bay Cities.

View the Graphs and Indicators

Volume 7, issue 5

Summary of April’s Data

The Federal Home-buyer rebate Incentive program ended at the end of April. The question that now remains on everyone’s mind is can the current up trend continue absent this additional assist. April’s sales volume came in slightly above average with the benefit of these incentives. The answer to the question of sustainability of the the present uptrend will start to arrive in next month’s newsletter. Most experts nationally believe that the program’s influence was very significant, however with our higher home prices locally there may not be a significant impact on our market conditions. Our indicators at the moment remain positive, Home prices have been rising overall since January 2009 though there is considerable resistance to moving up due to the lack of consumer confidence in the US economy. The demand for LA South Bay Real Estate remains strong, the Unsold Index is remains favorably low, we are not in a Buyers market except at the 1.5 million and above price ranges. Inventory In the New Construction Segment for the Beach Cities is now critically low with very little product available. Six Of Eight South Bay cities are indicating a strong month is ahead for May.

The current market remains as an ideal market for Buyers, Sellers, Investors and Agents. The increase in sales volume resulted in a drop in the Unsold Index even though inventory was up slightly in April. Most economists now believe the recession is over, with an economic recovery in progress we will benefit with a reduction in risk to our current low risk buy signal issued in March 2009. In light of poor projections of growth in personal income, double digit annual home appreciation in LA South Bay Real Estate is unlikely in the foreseeable future. Most of our indicators are positive at the present time. Last month’s drop in the Median Home price and the increase in mortgage rates has resulted in lower home affordability or as I describe it your dollar will be buying a smaller house in May as compared to April using this data. The Affordability Indicator is a better indicator to watch if you are trying to time the market.

The media relies very heavily on Median  and Average Home prices. These price indicators  used to evaluate market strength  do not by themselves indicate whether properties are going up or down in value and by how much. They only show  the prices at which the public is currently buying. Comparative market analysis must still be performed to determine value and price changes for individual properties.

Actual Median and Average LA South Bay Home prices bottomed in January 2009 and are on a new uptrend. Median and Average Home prices increased in March snapping back to the short term uptrend line from the previous monthly drop in February.

The Unsold Index is low at 3.55 months improving last month’s value slightly an indication of a very strong market. The statewide value is approximately 5.6 months) in comparison(March 2010).

The Total inventory was up slightly in April. Total Inventory is critically low in the South Bay and is on a downtrend, even an average number of sales will will result in a critical conditions where prices are going to have to move up at a higher rate.
Sentiment decreased last month but remains on an long term uptrend  since November of 2007.

City Price trends For Torrance, Redondo Beach, Manhattan Beach and San Pedro are shown at the bottom of this report with their deviations from the long term price trends.

The following conditions are supporting a market bottom and are reasons to buy now.

1 - Our Sentiment indicator remains on an uptrend.
2 – The Foreclosures charts are indicating a peak in foreclosures, if sustained it will
provide additional confirmation of the bottom of the market. The number of new foreclosure properties currently listed for sale in the entire South Bay as of today is low.
3 -The Affordability  chart  shows the affordability in January 2009 was at the highest since June 2003. From August 2007 to April 2010 affordability has increased approximately 45% . This indicator is the most important indicator if you are looking to get in to the market because it is a measure of how much you can buy for your money.
4 – Properties are being absorbed in the outside areas at discounted prices as conditions are continuing to improve, see the chart below (see Murrietta)
5 – Interest rates have very little room on the downside probabilities to the upside are highly likely.
6 – High Inflation is very likely to occur within the next 2 years (See the 10 year Treasury Yield curve below), All asset classes such as real estate will increase when that occurs.

Here are the reasons to wait: for a better buying time

1 – Low confidence in the national economy and increased unemployment locally may drive down prices and/or Mortgage rates. A double dip recession may be is a strong probability.
2 – Low number of sales may be an issue again, if that happens the U.I. (Unsold Index) will increase resulting in a large supply of homes on the market causing prices to go down provided inventory does not decrease.
3 – Interest rates may go down further improving affordability for more buyers.
4 – Interest rates may go up higher as econcomy improves forcing prices down to a better buying opportunity. The government has stopped buying Treasury securities, that will cause all rates to go up and prices down putting pressure on prices.
5 – Removal of Government incentives may result in a lower number of home buyers resulting in lower home prices in the future.

Remember to read the comments to the right of each chart below. Click on the graphs to enlarge.

Forecast

Home prices are destined to increase if the present trends continue in the LA South Bay. End of year seasonal slowing usually occurs at this time. January will be the month to watch for a possible surge in inventory. If that does not occur prices will rise rapidly soon after.

The impact of he current national economy situation and related credit issues will continue to put a negative drag on prices and the recovery in the local real estate market.

Application

In the summer of 2005 prices peaked for one month and the price trend started to level off. That was the start of a high risk time period a market down turn was forecasted. The Market Sentiment peaked at that time and started going down confirming the price peak. The sales volume also peaked and started going down. The Unsold Index was moving into the Buyers market zone. All this was forecasting a change in the market and an end to upward price momentum. Prices were relatively flat from the price peak in the summer of 2005 to the January 2007.Another price peak occurred which was an unconfirmed price peak, at a time which did not justify the continued higher prices. Most of the South Bay Home price decline occurred after the summer of 2008. The purpose of this newsletter is determine risk levels when deciding to buy or sell real estate. At present a low risk buy signal from March 2009 remains in effect.

Current Recommended Action – Low risk – Buy signal, Sellers in control market is near in most South Bay Cities.

View the Graphs and Indicators

Understanding Condo Association Coverage

While everyone’s condo association policy will vary slightly, there are a few things that you can expect to be covered. The most common things your policy will cover include the common areas and shared amenities in your building such as gas pipes. It will also cover all damage to the structure of the building. Some policies will include medical coverage in the event you or your guests are injured in a common area of the property. This is why its always important to make sure you understand your condo association policy thoroughly before purchasing homeowners insurance.

What Doesn’t Your Policy Cover?

Essentially, as a condo owner, in the eyes of the insurer you will be responsible for everything inside of the walls of your actual unit. This means you will be responsible for insuring everything from your fixtures and appliances, to valuable possessions of any kind just like a typical homeowners insurance package. However, it’s important to remember that your condo association policy might cover many of the same things as the standard package offered by your insurer of choice. This is when it’s a good idea to cross-reference the two, in order to get a more affordable insurance package that doesn’t include the aspects already covered in your policy.