L A South Bay Real Estate

LA South Bay Real Estate Forecast -March 2011

Posted on 30. Mar, 2011 by Barry Brickel in Market Forecasts

Summary of February's Data

February was greatly impacted by seasonality as shown in the sales volume graph below. The low sales volume for February should be the low for the year and we expect a higher sales volume in March as that will be the first month of the buying season.

February's sold data continues to reveal a flat consolidation trend of prices of prices with a relatively high variance in monthly sold prices. This price consolidation started in January 2009. Median prices were up for February at the same time as mortgage rates which resulted in lower home affordability the monthly cost of ownership was more expensive. Affordability still remains very high. Interest rates are receiving a lot of pressure in the up direction as the economy continues to improve and inflation increases, the economy is now showing signs of improving at higher GDP numbers and inflation factors will combine to put an increased pressure on mortgage interest rates, this may be delayed due to worldwide economic conditions.

The Unsold index, our most time tested Index went up in February due to the seasonal low sales volume and moved into the buyers' market zone even though the number of new home listing remained relatively stable. The last time we were in the buyers market region was the period between September 2007 to March 2009. It is not common to be in this zone in the LA South Bay.

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 data for Torrance and Manhattan Beach includes corresponding median home sizes which must be evaluated against the median price. In some months the median house prices went down but so did the corresponding home size, in other words home prices were down because people were buying smaller houses.

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

1 – The LA County Foreclosures charts are indicating a peak in foreclosures a very reliable indicator, 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 and more prevalent in the lower price ranges. The number af annual foreclosures have peaked. 
2 -The Affordability chart shows that the affordability in November 2010 was at the highest (best) since June 2003. From August 2007 to February 2011 affordability has increased more than 50 %. 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. Interest rates are now in an uptrend.
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 are at all time lows, Government buying of Treasury securities is forcing interest rates artificially down again, when the Federal Reserve's action ends rates or the economy starts to improve rates will be going up. Interest rates are now on the way up.
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. The Federal reserve has made the decision to print more money which may result in possibly runaway inflation
6- Most economists agree that the national recession is over  buying confidence should increase fueling the buying crowd. Home Buyer confidence is currently trending down.

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

1 – Low confidence in the national economy and increased unemployment, higher income taxation and or negative personal income trends locally may drive down prices and/or Mortgage rates. A double dip recession remains a possibility.
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 or addtional buying incentive programs may be offered further improving affordability for more buyers to buy. Interest rates are currently on an uptrend.
4 – Interest rates may go up higher as economy improves forcing prices down to a better buying price opportunity if sales volume also drops. Watch the sold data in March 2011 and beyond.
5 – Fear of a double dip recession may hold down buying activity resulting in lower home prices in the future. Consumer confidence is improving.

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

Forecast

Home prices remain a bottoming process in the LA South Bay, however due to monthly price fluctuations the consolidation pattern can be penetrated by an improvement in the national economy.The impact of the weak current national economy, lack of personal earning growth and related credit issues will continue to put a negative drag on prices and the recovery in the local real estate market, however we remain in one of the strongest markets in the nation and local supply and demand of available homes will have a larger impact.