L A South Bay Real Estate

Market Forecast – Oct. 2009

Posted on 15. Oct, 2009 by admin in Market Forecasts

October’s Forecast

Summary of September Data

September’s data reveals a strong south bay real estate market and a extremely hot market in the cities of Gardena, Hawthorne and Torrance. Most indicators continue to show positive trends.
Median Home Prices remained at the August home price level. Average home prices were down slightly lower than the previous month’s level. The short term uptrend is still intact. A down month next month might break the uptrend.
The Unsold Index is back down at 3.46 months indicating the continuation of very strong market. The number of homes in the market inventory of available homes in the South Bay continues on a long term downtrend. The sales volume was average again as it has been in the previous last three months, as long as sales volume remains at average levels a very hot market is in the cards in the very near future due to the long term down trend in inventory.
Sentiment remains on an uptrend.
Affordability improved slightly due to a further drop in interest rates but the highest affordability was in January 2009 and so far was the best time to buy in the current uptrend.
The rate of change in prices is increasing (getting stronger) and the Momentum of price change in now positive.
Gardena had the highest Percentage of homes in Escrow (PSR) was over 100% at 149%. indicating the number of homes in escrow exceeded the available inventory (homes from the previous month are still in escrow). Torrance and Hawthorne were also above the 45% threshold indicating a sellers’ market in those cities. Torrance had 80.0% of homes in escrow, a sellers’ market exists there as well. Gardena and Hawthorne were the two strongest cities in the location segment study Homes. The  under one million price range is a very strong market. the weakest price segment is the 1.5 to 2.5 Million price range, the highest price range in our study, which should normally be the weakest.

City Price trends For Torrance, Redondo Beach, Manattan Beach and San Pedro are shown at the bottom of this report

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

1 - Our Sentiment indicator remains on an uptrend.
2 – . The number of new foreclosure properties currently listed for sale last month in the entire South Bay was only 6.
3 -The Affordability monthly chart has been extended back to June 2002,, it shows the affordability in January 2009 was at the highest since June 2003. Affordability remains attractive.
4 – Properties are being absorbed in the outside areas at discounted prices as conditions are continuing to improve, see the PSR table below. The overallUnsold Index was at 3.46 months an indication of a very strong market for sellers..
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 drivie 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 more improving affordability. .
4 - Interest rates may go up high enough to force prices down. The government has announced it is going to stop buying Treasury securities,that will cause all rates to go up.
5 – The Foreclosures charts are indicating the number of foreclosures this year will surpass those of 2008. Evidence of a peak in foreclosures has not arrived.
6- Removal of Government incentives may result in a lower number of home buyers

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

To see additional Indicators click this link

September’s Forecast

The low risk buy signal continuation is now dependent on improving number in sales volume and/or a lowering of inventory, this is going to be critical after the Short Sale/ REO Inventory is absorbed and the lower end, (homes under $500,0000 disappear). See The Blog Post of Oct 7th reguarding The Impact Of Short Sales .The higher price ranges will need to take part in the uptrend.  The upper end ($1.5 – 2.5 Million) remains relatively weaker in comparison but is now at acceptible levels and is normal at this stage. Higher percentage price discounts can be found in that range. The 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 fore-casted. 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