L A South Bay Real Estate

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February is typically one the slowest months in terms of sales volume and came in at378 units sold up from January’s sold volume of 348 units sold in the LA South Bay.That was below the 502 unit mean value. This was mostly due to seasonal effects in January and February as shown in the sales volume history graph below. January and February are traditionally the slower months in terms of sales volume. March marks the start the of the buying season, we will be looking for higher volume in the coming months to validate the current market upswing. Results for Median and Average Home prices were disappointing but most of our other indicators were very strong. Median home values dropped to $420,000 from $465,000 last month. Average prices dropped to $553,941 from $638,590. The short term price uptrend was penetrated to the downside, both these values are impacted by the price most buyers are buying at and is not a reflection necessarily of whether prices are going up or down. This fact is confirmed in the price segment table below which shows a very strong market below $500,000. The Unsold Index improved4.39 months from 4.66 months, this value improved even though sales volume was below average. Total inventory was up slightly as discussed above The Unsold Index moved closer to a buyers controlled market but is basically in the middle of the balanced control market where neither buyers or sellers are in control, that is the preferred zone for both buyers and sellers. Next month’s data will be very critical and we willing be watching it very closely. March’s data will give us an indication of whether the price uptrend is likely to continue. Affordability increased in February due to the combination of lower interest rates and the lower median values.

The rate of change momentum chart (lower momentum chart) shows a drop from the peak in price momentum, but one leg down is not enough to draw any conclusion at this point. The price change momentum(second chart) showed a small drop and is only negative by a small amount. Sentiment increased again and remains on an uptrend since November of 2007 this is a new high for this cycle. Torrance was strongest city in February based on its Unsold Index of 3.79 months   Most South Bay cities experienced a PSR of greater than 45% indicating next month should be a strong month. Gardena had the highest Percentage Of Homes in Escrow in the South Bay (PSR) over 100% at 138% indicating the number of homes in escrow exceeded the available inventory (homes from the previous month are still in escrow). The PSR for the entire LA South Bay was above the 45% level at 81.5% very strong. Six of eight South Bay cities had PSR’s over the 45% threshold indicating a sellers’ in control market in those cities are expected. The $350,000 and below price range was the strongest market segment, while the 2.5 to 5.0 Million price range was the weakest price segment which is expected.

Most indicators continue to show positive trends.

Again the Media relies very heavily on Median Home Prices. Median Prices and Average prices are indicators we use to evaluate market strength they do not by themselves indicate whether properties are going up or down in value and by how much. They only show where the prices of where the public is buying. There is quite a bit of controversy as to whether Average or Median home prices are more significant. Comparative market analysis must still be used to determine value and price changes.

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 tend peaks.

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 yearly chart has been extended back to June 1995,, it shows the affordability in
January 2009 was at the highest since June 2003. From August 2007 to April 2009 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.
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 (Seethe 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 more improving affordability for more buyers.
4 – Interest rates may go up higher as econcomy improves forcing prices down. As above The government has announced it is going to stop buying mortgage securities, that will cause all rates to rise and prices may be forced down as a result of lower affordability.
6- Removal of government Buyer incentives such as the Home Buyer Tax Rebate 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.

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. March will be the month to watch for a confirmation of the current uptrend and will be very critical.

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. TheMarket 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, Neither Buyers or Sellers in control

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