L A South Bay Real Estate

Market Forecast – Sept. 2009

Posted on 28. Sep, 2009 by Barry Brickel in Market Forecasts

Overview of August Data

Results from August sold data indicates a strong market is continuing in the South Bay.
Median and Average home prices were down slightly but remain a short term uptrend snd moving back to their long term respective trend lines.
The Unsold Index is at 3.72 months indicating the continuation of very strong market. The number of homes on the market was reduced but so was the number of sales for the month.

Sentiment remains on an uptrend.
Affordability improved slightly due to a 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 135%. indicating the number of homes in escrow exceeded the available inventory (homes before August were still in escrow).Hawthorne was also above the 45% threshold indicating a sellers’ market in that city. Torrance of had 76.6% of homes in escrow a a sellers’ market exists there as well.
The $1.5 to $2.5 Million is the weakest Price Segment.
City Price trends For Torrance, RedondoBeach, 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 5
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 Unsold Index chart below. The overall index was at 3.23 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.
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.
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 athe number of foreclosures this year will surpass those of 2008. Evidence of a peak in foreclosures has not arrived.
6- Removal of Goverment 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

The low risk buy signal continuation is dependent are improving number in sales volume, this is going to be critical after the Short Sale/ REO Inventory is absorbed and the lower end, (homes under $500,0000 disappear). 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 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