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Southern California: Holding It's Own in the Real Estate Wars?

A very nice thing happened to me a few days ago... I received an e-mail from Peter Viles who has started a real estate blog for the Los Angeles Times called LA Land He found me through AR and featured a link to my post Southern California:The Market That Won't Die on his blog. Of course there was an immediate comment from Bakersfield Bubble who I believe was calling for reinforcements.

I'm currently having an interesting conversation with a gentleman named Howard in the comments part of that post here on AR. I don't know if Howard is a friend of the Bakersfield Bubble author or if he found me by accident. He also thinks I'm crazy and that the California housing market will soon fall into the abyss predicted by all Bubble bloggers and their followers. I know I won't win any points with Howard because he has his mind made up and nothing is going to sway him from his beliefs. But who knows perhaps we will both learn something.

So it was nice to find the following article in The Daily Breeze County's Housing Risk Limited. I was rather surprised to see this on the front page of the Business section... as articles that are somewhat favorable about the real estate market usually wind up in a small paragraph on the back page. The authors of the report HomeSmartReports.com is a company that tracks real estate activity through out the United States and compiles reports for buyers and sellers. Their conclusion is that California may hold up better then other real estate markets in the country.

Mike Ela, the company president, seems to think that California and particularly Southern California will have some problems but should weather the storm. Currently he uses a risk index scale rating of 0-100. Most of the country has seem their risk index level rise in the first quarter of this year from 5.24 to 5.43. In California the risk factor has risen from 1.45 to 1.82. In Los Angeles County that risk index rose from 1.14 to 1.30. In Orange County they put the risk index at 0.72. Mr. Ela believes that the Central Valley market of Visalia-Porterville will have major problems and has given them a risk index level of 4.50. Just so we don't get too excited Mr. Ela does point out that a lot of subprime loan defaults could change things somewhat in the future.

The South Bay and the local Beach Cities seem to be holding their own. In our office meeting this morning many of the agents have run into multiple offer situations on well priced properties in good locations. Over priced homes continue to hang on the market. Manhattan Beach is seeing an increase in sales as are the other Beach Cities... Hermosa, Redondo and El Segundo.

I think if California continues to have a fairly stable job market we might make it through the next year slightly bloody and wounded but not defeated.

Southern California Real Estate: The Market That Won't Die.

Posted by Manhattan Beach CA/ e-PRO..... Kaye Thomas... on 05/02/2007 10:28 PM

Comments (26)

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26 Comments on Southern California: Holding It's Own in the Real Estate Wars?

MAY

2007

Kaye, nice article - things are starting to get moving here - glad Calif. is holding it's own. We didn't get any property tax relief or insurance relief so the retirees and individuals on fixed incomes are really struggling with the skyrocketing costs of both here.

Cyndee-Thank you..I'm glad things are finally picking up in FL. I have a client in the Palm Beach area who has had her house on the market for a long time so hopefully that market may also start moving

Kaye,

Congratulations on your showing with the L.A. Times! No doubt you're doing a great job.

Our market in the OC sounds similar to yours. We've had a few multiple offers and we've had a few properties just sitting, primarily based on pricing of course.

Keep up the great work.

Kaye, Thanks for the great post. I was contacted by southern california realtors blog to join them and they also found me on active rain.

MAY

2007

Still holding here as well. Not as many sales but prices holding and condos still inching upwards just a smidgen. The inventory is cut in half compared to six months ago...mostly withdrawns. Property stays on the market a little longer unless it's prime condition and in a neighborhood they like.

Lynda-Thank you.. I think most of the markets seem to be improving slightly from last year nothing crazy just reaching a more level playing field.

Mana- I haven't hear of them but sounds like an interesting group

Sally-Our inventory is down about 50% from last year and seems to be mostly due to sales not withdrawals.. Wish it would pick up some in Kona where my Mom is located..Look as if in all markets the key is right price and condition..

Kaye if it's worth saying anything..historically real estate cycles are in in twenty year cycles give or take a few years. Ten years up and Ten years down. So if you can figure where your market is in this cycle you can pretty much decide how long things will take before the next trend up or down. Give or take a few years +-. Pretty much when the west coast and east coast are in a downwards trend mid America is in an upwards trend. As the east coast and West coast start trending down the area in mid America starts trending down. We predict were (Texas) in about the 4th year of a upwards trend giving us another 6 years of a upward swing until things start trending down. I did a blog on this back on 02/04 This is called the Contrarian Theory,

Danny-Your statistics sound right.. I think this is what a lot of people don't get.. real estate is not static but is always moving.. sometimes a lot and sometimes not much.. Glad to see Texas is finally moving upward I know it was slow for a long time..

Hi again Kaye,

If it's o.k., I'd like to add a coment to Danny's?

I'm not sure of other places in the country, however I think we see and upward and downward trend in CA that lasts less than 10 years. The last downturn began about the end of the third quarter in 1989 and lasted until about 1996, this was the longest slowdown I've personally experiened in r.e. In addition 1978, 1988, 1998 we all record years for us. The last 7-8 years have been the longest run-up in the history of our prices in the Golden State. Even with a slow down in pricing the average house payment I figure today is about $3,900-$4,400 a month with a 10% downpayment.

And I too am glad to hear things are going for the folks in the great state of Texas.

Lynda- Comment away...I think we are all saying the same thing.. Texas cycles just last longer then ours do.. I agree with you on the 7-10 years and have used that number in other posts.. I think the 10 up and 10 down for Danny in Texas seems right from what I know about their market.. I think Colorado also has a longer cycle then we do..probably similar to that of Texas.. Nevada and AZ seem to be similar to us..

I think there are two reasons why CA has seen such a long upward trend.. 1. extremely low interest rates 2. Increasing population..the housing supply is not keeping up with demand.. we run about 200,000+ units shy each year of demand .. and there were many years when even fewer homes were built.. It's going to get worse as each little city wants to halt development. The NIMBY crowd is winning in my area and much of Los Angeles County. I'm guessing you are seeing more of it in Orange County then in the past. I can't blame residents.. the infrastucture in most older cities is terrible with few upgrades over the years.... and traffic is a nightmare everywhere..

Yesterday on the news the latest population count in Los Angeles County was 10,331,939 people..That's more then the entire population of most states in the US. Statewide we are at 37,662,518.. and they have to live somewhere.

Kaye,

The OC market is the same as the LA south town market. We are stabilized with regard to prices, however sales are down. Buyers are still sitting on the fence. Prices are holding except for those that were listed too high to begin with. It will be a flat year, but there will not be a bubble burst. Our OC economy is too good for that.

However we are seeing an increase in short sales. Owners who have gotten in over their heads with ARM's and seconds, if not thirds. The note holders are still difficult to dael with, as they have always been.

It's just harder for us Realtors to make a buck or two.

Mike- I think we will be seeing more short sales in many areas in the next year for all the reasons you noted...Probably not as bad up here as we don't have the inventory you have in HB and much of Orange County. Lenders need to put their heads back on their necks and figure out how to handle these sales before they create a bigger problem. Many lenders are either dragging their feet or refusing to approve short sales. If they do then they don't want to see agents compensated. and often cut the compensation to 1% . Reminds me of the 90's.. took them about two years and a lot of foreclosures before they figured it out..

Hi again,

I'm in agreement with you on the short side of housing, the last figure I heard was years ago and we were behind then about 150,000 units a year. So I guess the 200,000 figure would be about right now. And yes, NIMBY has long been a problem in the OC. Now (like many other areas) we are seeing housing go vertical. You're probably been reading about it in the papers. It's happening in many areas of the OC. The Platinum Triangle of Anaheim is just one example.

As for short sales, we seen a few, but not too many. Those of us who did them in the early 90's can sure remember those days. At that time 20% of my closings were either a short sale or an REO, one out of five! And you're so right, most of the lenders were clueless in the beginning.

Lynda- We will see some short sales in the beach cities I don't expect to see a lot of them but I know we will see them in the surrounding cities as that was where the preponderance of no money down and sub-prime loans were. I did them in the 90's but even then we didn't have a lot at the beach.

I don't expect to see much in the way of vertical housing in our area.. these little cities are fighting tooth and nail to keep density low and developers out.. San Pedro has some lofts as does Marina del Rey.. but you won't see that here. The only type of some- what high density housing any city will approve is for 55+ and that only seems to be viable in Torrance.

Manhattan Beach is trying to limit density on merged lots and Redondo is in the middle of a proposition where any changes to property involving zoning must be approved by the residents via an election.

Meanwhile the residents cry about housing prices but they continue to do the things that encourage high prices..

MAY

2007

Ugh, I am sooooo tired of all the bubble people. Property is moving just fine if it is priced right.

Yeah! Go Orange County! Funny, I was out the other night and a couple of nay sayers were so convinced that the end is near! " I am not buying now when it is going to crash I will wait and make a mint in the future" I had to ask back, really is it the end in O.C. or in just your little world. You make $80k a year and are paying what in rent?

Laurie- Yep! They just don't get it..

Kelly-Good for you.. right now rents are going up faster and higher then property prices.. makes no sense but it makes the landlords happy

MAY

2007

Hi Kaye,

It was great to meet you at the blogger meet up in Laguna! I am slightly more pessimistic on the home price front for OC but overall agree that it is very dependent on how the job market holds up. I think with the recent layoffs in OC (NCEN, Impac, LendingTree, etc.) that people are starting to get a little nervous that jobs will become fewer. Luckily losses in finance/lending are being offset by growth in health care and other fields. We shall see, but right now it looks like more of a stabilization than a pop! Although I do think we'll continue to see downward price pressure for some time.

On the short sales: banks are just like sellers - they refuse to believe their property is worth less than they think it is! I've seen many homes that were in short sale go to auction because of delays that primarily stemmed from the lender dragging their feet over the short sale offer. Amazing!

Morgan- That was so much fun.. will you be at the one in June? OC has a lot more housing then we do so you may well see some changes.. so far in our area the employment picture is very stable.. Banks always seem a day late on what is happening around them.. first they create the problem with loans they know make no sense and then they wail when it's time to deal with their mistakes.. they really ought to hire at least one person per bank that has a clue about how things work in the real world..

Hi Kaye,

I agree w/you. Highly desireable areas with little inventory are going to continue to thrive. Supply and demand dictates that. I'd say Manhattan and Hermosa fit that description to a tee!

I hadn't heard about the June one until just the other day - do you have a link to it? I'll definitely try to be there!

Best,
Morgan

Morgan- Here is the link... I don't think a place has been chosen ...

MAY

2007

Kay,

Not sure this will help but I flagged this post..I thought it was different and well written and of course an interesting post.

Neal- Thank you.I value your opinion..

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Manhattan Beach CA/ e-PRO..... Kaye Thomas...

Manhattan Beach, CA

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Address: 905 Manhattan Beach Blvd, Manhattan Beach, CA, 90266

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