You might call it a moment of increasing consumer choice.
Or you might call it a time of increasing price pressure as supply climbs and climbs.
Whatever you call it, SFR inventory at the end of April – 107 SFRs west of Sepulveda – was the highest MBC has recorded in a year-plus of public market tracking.
Yes, yes, we said the same thing when we hit 97 at the end of March. So sue us for starting to sound the same.
Partly to blame: 31 new listings in the month of April, down very slightly from 34 in March, and steady with the February rate. (For a yearlong view, see the graph in this story.)
Also, this caveat – the 107 figure includes one listing technically "on hold" – 757 30th, new construction that seems still to be very much for sale, and one new listing at 918 10th in the Hill Section that has a sign, a website with cheesy music and an ad in the Beach Reporter, but wasn't yet on the MLS as of April 30. We considered both to be for sale.
We saw 14 sales (new escrows) in April, and several cancellations.
Let's not miss this striking year-over-year comparison – in April 2007, we counted 66 SFRs west of Sepulveda on public offer. This year, 107.
That's +43, fully 65% higher than at this time last year.
Thursday, May 1, 2008
Climb, Climb
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32 comments:
Sorry, MBW. This is coming from someone who thinks prices are headed south for a bit: Looking at 1.5 years is an absolute joke. With no reference point to historical downturns, this number is as meaningless as those rebate checks to most of the population of MB. There is no means to a comparison.
I agree with 6:55. Lack of historical perspective makes your chart, just like the LA Times consumer confidence graph the other day, appear far more dire than is in fact the case.
First, a minor point. Currently 103 SFRs for sale in your target area. This number tends to bounce around a lot at the end of every month.
More importantly, there are 156 SFRs currently for sale in Manhattan Beach. If you had started tracking just a few months sooner, MBW, you'd have seen that inventory was higher in September and October of 2006 (peaking at 171 in September of that year). Prior to that, inventory spiked after the 9/11 attacks and stayed high through the middle of 2002. But even prior to 9/11, inventory was hovering right around 150 homes for sale.
In the early to mid-90s, there were, at times, some 450 SFRs for sale in MB. We have a long way to go to reach that point.
For those interested, here is the data on all Manhattan Beach SFR sales for the first 4 months of this year compared to 2007 (MLS-reported data only).
2007
Median - $1,787,000
Volume - 140 closed sales
2008
Median - $1,682,000 (-5.9%)
Volume - 76 sales (-46%)
How about going back to 2000-2006 for those median and volume numbers as well. Thanks
The graph is what it is, one year's worth of data. Make of it what you will. Clearly it matters to sellers and buyers today that inventory is being added at a clip higher than the monthly sales rate, regardless of the precise historical comparisons we might wish for.
I'd happily publish any comparable inventory data going back further, but I don't have it and I don't have access to it. By Huggy's response it appears that it is possible to suss it out of the MLS database. But it'd be painstaking to pull month-by-month even for the 2000s, which would make for the most valuable trend data (I could even do a 12-month moving average).
If someone gives it to me, I'll graph it.
I was just handed the complete set of sales data from Dataquick going back to 1988, so you'll see that in the next several days. Thanks to that reader in advance!
Speaking of pricing pressure, i just got an email showing 794 27th St with a price drop and i went to ZipRealty to see the trend and here is what I saw (not sure where it started):
Price Reduced: 02/28/08 -- $2,599,000 to $2,399,000
Price Reduced: 04/02/08 -- $2,399,000 to $2,299,000
Price Reduced: 05/01/08 -- $2,299,000 to $2,099,000
Regarding 918th 10th St, the realtor (Kathy Kernochan) must have took exception to your comment about the music. It has since been removed.
Seems you are quite influential!
10:31am said:"Regarding 918th 10th St, the realtor (Kathy Kernochan) must have took exception to your comment about the music. It has since been removed.
Seems you are quite influential!"
Or, you are an idiot that doesn't know how to use a computer. The music is still there.
10:37
My bad. The music doesn't come up on my computer. My corporate firewall blocks streaming media from some websites. Perhaps this is why I don't get it.
Oh well, sounds like I'm not missing out on anything.
Wow. That site makes me want to hop in an elevator.
This thing is really starting to crack..there will be no lending until these prices stop falling..and the prices won't stop falling until there is lending.
Huggy and 6:55. Ease up on the length of time. Plain and simple, focus on the trend. Say what you want about how previous declines looked, the fact doesn't change that there is 65% more inventory today than this time last year. That is a trend worth looking at. It's Econ 101, more supply on the market, with less demand from the consumer, equals lower prices. Huggy, as you've pointed out a number of times, this is why prices haven't tanked like in other areas. However, they've certainly begun the descent.
I have no doubt that we will NOT see an increase in inventory into the 400s, but when you're coming off record years of increases, bubble prices, unprecedented access to capital, simply going from 65 to 107 homes is significant. And think about it, if we didn't have all the cancelations over the past few months the numbers would obviously be higher. Now we even have builders renting out their newly finished homes rather than try and test the water and watch their investment/spec property sit.
Huggy, by the way, still would love to hear you comment on what you'd pay for 30th IF you were going to buy it. You said it was overpriced, give us your opinion about how overpriced it is. What would you bid?
Wow 8:06 did you have a team of monkeys working around the clock to come up with that? Let me predict in kind:
The Soviet Union will fall and the widow Kennedy will remarry a Greek shipping magnate.
Mook, I gotta say... all this begging Huggy, Yeesh!
Kinda loosing respect for the Mookmonster. Liked ya' better with more piss and vinegar.
Mookie,
Why can't you take the data that Huggy gave everyone and make sense of any of it. Looking at just one year is meaningless. Huggy mentioned the inventory was higher after 9/11. Of course, it turned around in mid-2002 then went gangbusters. Huggy isn't saying that's going to happen here. He is making a point that it likely will not get to the point it got to in the early 90s. Of course, you know all about that because you weren't even here then.
8:38 I beg to differ. Mookie has been here for a very long time. In fact, there is overwhelming evidence that he was prevalent in what is no known as “Manhattan Beach” during the Paleolithic era: genus Mookasaurus erectus.
mookie:
6:55 here. say what? "And think about it, if we didn't have all the cancelations over the past few months the numbers would obviously be higher." Uh, and? If we didn't have homes falling out of escrow, it would be lower. Your point? In stats, small populations and few observations increase the margin of error. There isn't enough data. Add to the fact that a good number are STILL spec home crap, and you have little trends.
Ya'ay Kaye the best broker in the South Bay!
Mookie, how can you, as a financial guy, say, in effect, ignore historical data? My point was that inventory has climbed to current levels in the past, most recently September, 2006, without achieving any real predictive power about what is to come. The higher inventory that occurred after 9/11 preceded a 4-year real estate boom; the sluggish Fall, '06 market preceded a very strong Spring '07. What did those trends portend?
You said, "I have no doubt that we will NOT see an increase in inventory into the 400s, but when you're coming off record years of increases, bubble prices, unprecedented access to capital, simply going from 65 to 107 homes is significant."
I disagree. Under those circumstances a small increase (and I regard 42 additional homes for sale as just that), is NOT significant. Indeed, it's to be expected. Bottom line: If you look at a short time frame and a small inventory data set (and whether we're talking about 65 or 107 homes for sale, that is a small data set), you will be wrong about the long-term ramifications as often as you are right.
Let's take the bear case. Why couldn't we see an increase in inventory in MB to levels consistent with the early-to-mid '90s? Granted, all the pieces aren't there yet as there are currently virtually no foreclosures, pretty steady employment, low interest rates (provided you qualify). But there is no shortage of predictions (certainly not on this blog) that all of those positives are about to become negatives.
Btw, Fall, 2006, is also significant in that our slow market then gave birth to the Cult of the Clueless; it just took a few more months for MBW to creat the blog that gave the COTC its preferred podium.
More later on 30th St, Mookster. Gotta run, real estate calls.
To me the inventories that we saw in the 1990s will not occur again because that was more related to the the Peace Dividend and the Republicans capturing leadership in Congress. Newt became Speaker and Lockheed, I believe, moved their operations to his congressional district. I had neighbors who moved.
I also do not think inventories in 90266 will rise much higher because of the changing demographics in Los Angeles County. I think the rich are getting richer and the poor are not getting poorer but they are certainly losing ground relative to the rich. The dispersion around the mean income is widening. I will offer one humble statistic. In 1999, the number of households in Los Angeles County earning over $150k annually was 129,000 or about 6.3% of the households. In 2006, there were 301,000 households or 9.5% earning over $150k. I think this income dispersion will continue to widen unless, of course, Obama tries to even it all up. I think what is occurring in the economy is just a small blip. The economy will start flowing again once the credit markets settle. So If you are out there waiting, I would say an inventory of 200 is a signal to buy.
Huggy and others - In any type of investment, yes ANY investment, and RE is an investment, there are both fundamental and technical factors that dictate price. While I don't want to turn this into an arguement on fundamentals vs technicals, I am a believer that both need to be considered when making any evaluation on the direction of prices (whether it be corn, oil, stocks, or RE). I actually agree that fundamentals are more important than looking at a chart, but using charts can get you great entry and exit points.
This site has painstakingly debated over the fundamentals of the current MB RE market. We can go on and on about who is right, but I believe what we are seeing from a fundamental picture gives me conviction that prices are going lower. Mortgage rates are higher, loans are harder to get, there are fewer buyers able to get access to credit which reduces demand in MB, banks are tightening standards, inventory is rising virtually every month in MB, homes are sitting longer, 9 out of 10 homes sells below list, builders have now resorted to renting their finished product, the economy is in recession (yes, eventhough GDP was positive for Q1 I believe we will see a negative adjustment and Q2 will also be negative), American Express has raised reserves to offset deadbeat credit card holders, Starbucks has had a dramatic change in same store sales pointing to fewer people buying their product, Nordstrom had a horrible quarter, restaurants around town are easier to get a reservation, BMW had record defaults on auto loans this quarter, Tiffany has continued to point to lower US same store sales, consumer confidence has reached depths that haven't been seen for 25 years, the securitzed market has basically stopped securitizing mortgages, most banks this past quarter have pointed to prime loans as their next debacle as they are continuing to reserve more and more to offset losses from prime loans defaulting, I can go on and on. So, in my opinion, the fundamentals look weak and there is little evidence that they will turn around soon.
As for the technicals... Give me a year chart that looks like the one MBW posted and I can use it. Add data that Huggy gave and that gives me even more conviction. I'm not saying a longer dated chart wouldn't be better, because it would, I'm simply saying that the current trend points to increase supply coming on board, coupled with lower fundamental demand (based on my commentary above), which will decrease overall prices.
When I look at the chart I see a few things. I see a breakout in Feb when we touched 84 homes, which occured when inventory went above the 81 homes in Sept. I see year over year increases in inventory for every month this year (going off a recent poster who said this). I now know from Huggy that with a current 156 SFRs on the market that we've broken out above his pre 9/11 call when inventory hovered around 150. I also know that resistence will likely come in around the 171 homes level as he indicated that was the near term peak back in Oct 06. That's simply what I see.
Now, does this make 100% of my decision? No, but it helps me in my evaluation of the current cycle. Would I rely 100% on this chart for determining when I would get back involved in RE, absolutely not, but maybe 20-30%, tops. For example, if the economy turned around and inventory was still rising, I would have more conviction that economic fundamentals would significantly outweigh the RE technicals and would give me more conviction that MB RE could be closer to a bottom.
Nice and boring I know, but I have time as the open homes don't start for a while.
Mookie:
That was one of the dumbest things I have ever read. Are you really trying to apply technical analysis to the number of homes on the market? That is SO IDIOTIC, that I am convinced you are my ex-wife. Please, Sarah, put the computer down.
First off, support and resistance in equity pricing come from a stock that hovers at that price for a while. If there are a good number of buyers at $80, let's say, then support will be at $80, provided the stock hovered there for a while. Resistance is the opposite. A stock creates a resistence point as profit takers sell at their target (thereby making technical analysis a self-fulfilling prophecy - but more on that another time).
That said, potential sellers aren't swayed by hard numbers like 171, etc. That is just stupid. Sorry. Do you really think that if the number of homes on the market "breaks through" 175, there will be a flood. It doesn't work that way!!!
Your use of technical analysis is an embarrassment.
Lastly, home isn't an investment. It is a roof over your family's head. Leave the investments to the professionals.
Ladies and gentleman - If anyone else tells you that inventory can be dictated by fundamental analysis, run quickly to the nearest exit.
Thanks for the laugh, Sarah. I mean mookie.
There is absolutely no reason to buy right now.
1. The bulk of the Mortg issues are ahead of us (look at the data)
2. The economy sucks (look at the data)
3. Certain segments are being hit hard - RE, Construction, Mortg, Financial (each of which have been a big part of driving demand in MB)
4. People always will sell, but now you have an added amount of people have to sell (more Inventory - data)
5. Many buyers are waiting OR can't buy because they can't (pick one): Sell their home; Get a Loan; Are nervous of further drop in pricing, and did i say can't sell?
The data is there to show their is more downward pricing pressure, and like prior large RE price drops we will find the bottom and drag along there for a few years.
5:17 PM
In my opinion, household income in MB will rise far faster than in the rest of Los Angeles County. This will keep the median house in MB near the current prices. I do not see a huge drop. In the last housing (1989-1997) decline, the safest place to be to guard against housing price decline was in the low-income neighborhoods. This recession is different in that I believe that the low-income areas will be hit harder than the high-income areas. The people that are showing up on the foreclosure lists now are those that moved out of the low-income areas of Los Angeles to Riverside and San Bernardino counties. You did not see that during the last decline because the low-income people did not own homes. Percentage of people who own homes has risen from 60 to 70 percent of households (from memory do not have a citation sorry) over the past decade.
Also I see somewhat of a floor being put into place. There are at least three low-end houses along Rosecrans currently being remodeled. So at least some people have confidence.
On a potential catalyst that we could see next year is a change in the AMT. If you have income right now between $150k and $350k you probably cannot deduct your interest and property tax. If that changes it will make these $2m houses much more affordable to more people. I have hopes that this may occur in 2009. With the AMT in place and prices not rising, it is probably cheaper to rent right now. Interest + tax + maintenance > rent. The danger is that are you able to move fast enough when prices start rising. I have made offers on many houses and have not been able to close the deal.
The people who can put together loans and deals in the current environment, I am almost certain will end up the huge winners.
I do respect the opinion of those choosing to wait and enjoy the discourse on the blog. Thanks to MBW.
Huggy, your post at 10:19 was interesting and informative, but did you really need to end it with that rant? As someone who owns a business, it occurred to me that the “COTC” are potential clients. I find it utterly strange that people on MBC seem to know who you are. Whatever the case, I believe you demean yourself when you go to the dark side. You’re clearly a very seasoned, intelligent individual and you’re at your best when you share your wisdom with those of us less learned about RE. I sincerely hope you have record-breaking year.
7:25p - thanks for your opinion. the onl difference is my post is based on data and fact - not opinion.
Pricing pressure is downward and will continue to be, and the bottom will be multi-year.
No reason to buy right now. No urgency until we see a bottom for 6-12 months
7:52
Huggy is angry because his business has been negatively impacted and he's now blaming his clients and, as you noted, potential clients for his situation.
9:57 Let's take a break from nasty comments. We're all in this together.
MBW:
Did you delete mookie's reply to my technical analysis comment and my subsequent reply? If so, why? Did he and I type something inappropriate?
PS,
This was mookie's post:
mookie said...
1:49 - Can you be anymore gullible? I truly wish many of you would pause before posting. At least I now know how to get under your skin too. Well, actually that would be more difficult since you are Anon # 2,568. Get a handle so we can all witness your brilliance.
By the way, now we know why Sarah left you. You take yourself way to serious.
5/3/08 2:43 PM
And this was my reply:
Nice try mookie. You didn't get under my skin. I see that you realized how dumb your post was and are now back-peddling to save face by throwing insults about my divorce. Give it up.
At least be man enough to admit that your thinking was flawed instead of turning it around on me for your lack of logic.
If you want it up, it's up. I was taking it as a fair criticism that mookie had crossed a line and cut both for that reason.
Here's a rare exception – comments about the comment policy will still generally be deleted.
Random bits of wisdom from Huggy:
MBWatcher said I'd happily publish any comparable inventory data going back further (than one year), but I don't have it and I don't have access to it. By Huggy's response it appears that it is possible to suss it out of the MLS database.
Not really true, to my knowledge. I'm relying on an outside service which has data going back to mid-2000. Prior to that, I'm relying on anecdotal evidence from other professionals who went through the early '90s recession-induced downturn. Our MLS does give us mid-90's sales figures but not inventory, as far as I know. Would love to see something authoritative on mid-90s inventory. I think it would be instructive to the COTC, give them some perspective (assuming they are not immune to that sort of thing).
12:34 on 5/3 finished with So if you are out there waiting, I would say an inventory of 200 is a signal to buy.
I'm not sure I agree with everything in your comment but I'd like to know where you came up with 200. And is that SFRs for all of MB or just west of Sepulveda?
My philosophy remains the same - If you (1) want to buy a home, (2) can afford to buy the home you want in the neighborhood you want to be in and (3) do not face the prospect of having to sell over the next few years, then by all means do so. Otherwise, sit tight.
Mookie applies fundamental and "technical" analysis (if the latter term can be accurately applied to MB housing) and concludes that now is not the time to buy a home. Suffice it to say, I don't share Mook's view that buying a home is all about technical and fundamental analysis nor am I convinced that his technical analysis is an accurate or even reasonable assessment.
As for fundamentals, we've been around the block (and the blog) on those issues for some time and Mook could be right. Regardless, economic fundamentals obviously are an important component of factor number (1) above as far as Mookie is concerned. Even so, its interesting that he is writing about how his fundamental analysis tells him now is not the time to buy right before he goes out to look at open houses.
7:52 said I find it utterly strange that people on MBC seem to know who you are.
Uh, no, actually the only ones that concern themselves with my identity are the Cult of the Clueless and, as the name implies, they are clueless so my identity is safe for now.
I don't think I'll break last year's record but thanks for the good wishes.
9:57 said,Huggy is angry because his business has been negatively impacted and he's now blaming his clients and, as you noted, potential clients for his situation.
See what I mean, 7:52, about the cluelessness of the COTC? It is virtually limitless.
Huggy
"12:34 on 5/3 finished with So if you are out there waiting, I would say an inventory of 200 is a signal to buy.
I'm not sure I agree with everything in your comment but I'd like to know where you came up with 200. And is that SFRs for all of MB or just west of Sepulveda?"
I was just trying to come up with an actionable number and probably just drew too close of analogy to the stock markets which I have more experience in and have studied longer. The 200 inventory was in reference to the current 150 inventory in all of MB not just West of Sepulveda. On re-reading the comments, I think 200 is too high but if it did reach those levels I do think that we would be near the bottom. Of course, you need to look at more than one actionable statistic.
The one thing that I would like to see on the blog is analysis or strategy from the "wait and rent" crowd of when is the right time to buy. Of course, nobody is going to reveal the cards that they are playing.
One thing we need to realize is that 99% of the people on this blog are here for entertainment. So if you are trying to impose professional standards on this blog especially in the comments section, I think that you in for a lot of frustration.
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