|
Summary of October’s Data
It looks like the Hot Real Estate market of 1996-2005 is about to return. The data from October reveals a very strong South Ray real estate market mimicking the conditions obtained during the hot market of 1996-2005. An extremely hot market now exists in the cities of Gardena, Hawthorne and Torrance with Unsold Indexes under two months. Most indicators continue to show positive trends with an Unsold Index for the LA South Bay index under three months. The Momentum charts below that the market strength is very close to levels obtained in the peak of the 1997-2005 cycle.
Median Home Prices increased slightly in October from the previous month. Average home prices were down from the previous month’s level. The uptrend up is slower than expected but will be accelerating at higher levels when the inventory becomes critically low which will occur soon.
The Unsold Index is now under three months for the LA South Bay at 2.96 months indicating a very strong market exists at the this time. The number of homes in the total inventory of available homes in the South Bay continues on a long term downtrend. The sales volume was above average for the fifth straigth month as long as sales volume remains at average levels the unsold index be will go lower and result in accelerating home prices. The long term trend is still down, It will require several months of upward price changes to change the trend direction. The Short term Trend is still up
Sentiment increased again and remains on an uptrend since November of 2007.
Affordability dropped slightly in October. The highest affordability was in January 2009 and so far was the best time to buy in the current uptrend. The income required to purchase the median priced home requires a $10,000 increase in income, now at $100,310 per year.
The rate of change in prices is increasing (getting stronger) it is now at zero indicating a change from negative to positive acceleration of prices. The Momentum of price change is at a very high level approching the levels obtained at the market price peak in the summer of 2007.
Hawthorne had an Unsold Index of 1.18 months something that hasn’t been seen for many years. Gardena had the highest Percentage of homes in Escrow (PSR) over 100%, at 136%. indicating the number of homes in escrow exceeded the available inventory (homes from the previous month are still in escrow). the South Bay cities of Torrance, Hawthorne and San Pedro were also above the 45% threshold indicating a sellers’ in control market in those cities. Gardena and Hawthorne and Gardena had Unsold Indexes under two months, an extreme sellers’ in control market exists in those cities. The $500,000 to one million price range was the strongest price range while the 1.5 to 2.5 Million price range was the weakest price segment.
City Price trends For Torrance, Redondo Beach, Manhattan 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 13 higher than the previous month of six but still very low.
3 -The Affordability monthly chartshows 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 thePSR table below. The overall Unsold Index was at 2.96 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. 7- The Buyers Rebate program is a motivation to buy now and remains in effect.
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 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 and prices down.
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. the number of national foreclosures filed are expected to increase in 2010 before peaking later in the year.
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.
Forecast
Home prices are destined to occur if the present trends continue in the LA South Bay. End of year seasonal slowing usually occurs at time. January will be the month to watch for a possible surge in inventory. If thst 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
|
