L A South Bay Real Estate

LA South Bay Forecast – July 2010

Posted on 19. Jul, 2010 by Barry Brickel in Market Forecasts, Uncategorized

Summary of June’s Data

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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