LA South Bay Real Estate
Market Forecast 

April 15, 2009

Volume 6, issue 4

Written and Created by Barry Brickel J.D. Keller Williams Realty

LAsouthbayRealEstate.com

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Overview

 The Median and Average home prices remain on their downward  trend lines for the overall South Bay.  Average home prices  were up over the last two months but the trend direction has not changed. The Median home price was slightly lower than the the previous month, several months of increasing prices are needed  to change the slope of these lines.  The Price Trend lines represent the health of the overall South Bay but it  is not representative of all cities such as the Beach Cities and Torrance. The price trends in Redondo Beach Manhattan Beach and Torrance are shown on our corresponding city websites graphs for those cities (see the addresses below). Specifically the Torrance trend is now showing a 8.1% decline since January 2008 to the present (15 months), Manhattan Beach's price trend  decreased 1.8% in the same period,. Redondo Beach experienced a decrease in prices of 10.33% since January 2008,. Prices In the South Bay did not go down until late summer of 2008. Since actual prices can fluctuate as much as + or - 10% from the trend line or as much as 20% on a monthly basis they should not be used for for year to year comparison ,use the price trend rather the actual monthly price data points for comparisons.

 A low risk buy signal is now in effect.

Current Market Conditions

The main problem of the current market is the low buying activity, Last months sales volume increased but it is still below the average of 502 units. The fundamentals in the LA South Real Estate market remain strong. The Unsold Index chart shows conditions have improved but is still in the buyers market zone. It ist ready to enter the neutral zone to an up tick in the number  of sales in March. The main obstacle to new market up trend overall is due to low consumer confidence in the U.S. Economy which has resulted in buyers that are reluctant.. The demand for housing in the South Bay remains high at the present time. The number of available homes has been relatively constant for the last couple of years.Our Sentiment index was up slightly in March continuing the current up trend.

For those of you are that are waiting for the bottom of the market, It has already come.

The most important indicator for you to watch at this time is affordability, not home prices.

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

1 - Our Sentiment indicator remains on an up trend
2 - The Foreclosures charts are indicating a peak in foreclosures, if sustained it will mark the bottom of the market and start of a new up trend. The number of new foreclosure properties currently listed for sale in the entire South Bay as of today is only 7.
3 -The Affordability chart has been extended back to June 2002,, it shows the affordability in January 2009 was at the highest since January 2002. From February 2008 to affordability 2009 affordability has increased by 39% . 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 PSR chart below (see Murrietta)
5 - Interest rates have very little room on the downside probabilities to the upside are much likelyr than the downside
6 - High Inflation is likely to occur within the next 2 years, 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 unemployment locally may increase especially locally, driving down prices and/or Mortgage rates.
2 - Low number of sales may continue 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 even more.

 Remember to read the comments to the right of each chart below.

For individual LA South Bay City Market Strengths see the tables websites below.:

Forecast

Market conditions are not going to continue to improve as long as sales volume remains at the current below average level. The number of homes under $500,000 is however very small. If the market upturn continues these homes can disappear fairly quickly maybe as fast as in one to two weeks. The foreclosure and short sale homes available are decreasing, that will reduce the number of homes available overall. The upper end remains weak at the present time higher percentage price discounts can be found there. The current national economy situation and related credit issues will continue to put negative pressure on prices and delay a 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. 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. South Bay Home prices first started to go down inl the summer of 2008. The purpose of this newsletter is determine risk levels when deciding to buy or sell real estate.

Recommended action - Low risk - Buy signal

Median and Average Home Prices - LA South Bay	Average Home Price  March 2009= $601,345 Median Home Price  March  2009 = $432,500 Average Home Price February 2009= $566,475 Median Home Price  February  2009= $438,500 _______________________________________ **Average (Sum of the Sold prices divided by The number of homes sold) *Median ( half of homes sold above and half of homes sold below this price) Condition   - Median Prices in downward trend                     - Average Prices are rising.
Unsold Index LA South Bay	Unsold Index March  2009            =  6.20 months February  2009       =  8.98 Months        Current Condition - Buyers Market with strong balanced market bias.     ____________________________________________ Legend: 0 - 2 Months  =  Sellers' Market 2 - 6 months   =   Neutral Market 6 - 12 months = Buyers' Market 12+ Months = Strong Buyers' Market
South Bay Home Affordability Comparison	Local Home Affordability Annual Household Income Required To Purchase A Median Priced  LA South Bay Home. (Based on 80% financing) The median price home purchased in August of 2007 would require a household income of $185,173. In  March 2009 the same median price home would require a household income of $92,880. In other words the median home would require 50.1 %, approximately 1/2 of the income that was required to purchase the same home in August 2008. or conversely you can now buy twice the home for the same amount of money as in march of 2009. This Graph is important for extremes and trends and not the actual data values because your financing is mostly likely different, however the affordability comparisons are the same.
Price Momentum (12 week Simple Moving Average	Price Momentum (12 month simple moving average) this is a measure of the strength of    price changes. Above the zero line indicates positive strength below the line, negative price strength. The farther away from the zero line the stronger the price momentum. For March 09 we can see a consolidating of    price momentum points most likely predicting a bottoming in the trend, the likely direction is up.

Change In Price Momentum (12 week Simple Moving Average)	Change In Price Momentum or moving average of the moving average of the price momentum chart above. This chart is showing price momentum is increasing in the positive direction., the market is turning around.
Ratio Percentage Of  Homes in Escrow	PSR Ratios -  (Percentage of sales currently in  Escrow 25-45% = Balanced Market less than 25% = Buyers' market Greater than 45% =Sellers' market Values over 100% were obtained in 2005 The City of Gardena was the strongest city segment in the South Bay for March 2009. Murrieta was the strong city in this study  due to the high number of Foreclosure and Short Sales.
Number of Foreclosures LA County Number Of New Foreclosures Listings in The South Bay MLS LA County Foreclosures Last 8 Quarters	LA County Foreclosures The 4 th Quarter of 2008 had 14,410 Foreclosures In July of 2008, A new law went into effect -30 days notice had to be given to a homeowner warning the homeowner that his mortgage was in trouble before the NOD could be filed. The Lower bar chart shows the quarterly foreclosure history since the first quarter of 2007. Foreclosures for 2008 surpassed the last peak of 1996. After the foreclosures peaked in 1996 the market started its last boom in real estate prices. Therefore we are looking for a peak year of foreclosures to market the bottom of the market and start of a new leg up. From the quarterly graphs it looks like that may have already occurred but stay tuned for further data confirming the peak in Foreclosures keep an eye on the bottom chart.. The number of foreclosures is defined as the number of Notice Of Defaults(NOD's) filed, not the number of individual homes in foreclosure, for example, one home can have several notices of default filed if there are multiple loans on that home that are in default. South Bay Foreclosures The number of new foreclosures added to the South Bay MLS was 7 in March.. Data was obtained on April 14. The two lower charts indicate their was a peak in foreclosures in early 2008.

Buyer Sentiment - LA South Bay	Sentiment This is an indicator of Home-Buyer Conviction March 2009 = 34.98 Market peak value = 94.14  July 2005 (Confirmed peak price) Market Condition - market is steadily improving buyer sentiment is improving.
Sales Volume History LA South Bay	Residential Sales Volume Average monthly sales - 502 Units March. 2009 - 366 Units
Average Marketing Time	Time Required to Market A Property March 2009 =77.43 Days February  2009 = 96.83 Days

Mortgage Rates 6 Month Trend	Monthly Mortgage Trend   April  9, 2009 - 4.97%
Location Segments	The Location Segments are used to determine the Relative strength of the Real Estate market for an individual City For March 2009 the strongest market was found in the city of Gardena. The weakest area was found in .Hermosa Beach  The 3 month average for new construction was12.19 months, improving last month index of 15.49 months.
Price Segments	The Price Segments are used to determine the relative strength of several price ranges. For March 2009 the strongest price segments was the range between $350,000 - $500,000 The weakest Price Segment was in the $1.5 million to $2.5 million range.

Barry Brickel CA Real Estate Broker # 00947259 Keller Williams South Bay Torrance, CA Click Here Search For All LA South Bay Real Estate MLS Properties Currently Listed For individual city price trends visit the following websites: RedondoBeachMLS.com ManhattanBeachMLS.com TorranceMLS.com Resources The data used for LA South Bay Real Estate is obtained from the Greator South Bay MLS areas 101-193, (North Inglewood to San Pedro),LA Business Journal, LA County Assessors Records, Dataquick Information Services, US Census Bureau, and the National Association of Realtors.     Copyrighted Material 2002-2009 The Website content ,hard copies and email versions of this newsletter were created by Barry Brickel for use by his clients and potential clients. All of the  of the content, charts, graphs and indicators are copyrighted by Barry Brickel. J.D.. Disclaimer All data representations and conclusions are the sole opinions of Barry Brickel J.D. and are not to be construed  as a recommendation to buy, sell. invest or transfer real Estate or relied upon for such purposes.