Housing Inventory in Los Angeles by Zip Code

There's been a lot of talk lately -- by agents, buyers, sellers, agents and even pundits on CNBC -- about when the housing market will hit bottom. And everyone wants to know how to tell when we've hit bottom.

One of the most-discussed indicators is the excess housing inventory. Housing inventory has swollen as buyers have retreated and bank-owned properties have flooded the market. The thinking is that a recovery can't begin until the inventory of unsold homes is whittled down to a reasonable level.

Indeed, some areas of Los Angeles are flooded with unsold homes -- either homeowners that can't sell or bank-owned properties that were foreclosed upon. There's even a growing discussion out there of the "shadow inventory" -- these are bank-owned homes that banks aren't putting back on the market, as well as homes that homeowners want to sell but are waiting to sell until the market recovers.

But like everything in real estate, the inventory story varies widely from neighborhood to neighborhood.

There are very logical reasons for this.

First, some areas of Los Angeles have seen very few foreclosures. Second, some areas still have a lot of pent-up demand and good things sell quickly. Third, some areas have seen prices hit bottom, while other areas likely still have some areas to fall.

And as the housing market continues taking stronger steps toward an eventual recovery -- declining subprime foreclosures, bailout of Fannie and Freddie, buyers returning to the market, interest rates falling -- it's probably a good time to take a look at inventories in Los Angeles at the Zip Code level.

So I did.

I looked only at Single Family Residences and in the areas from SilverLake to Santa Monica/Venice on the city side and Toluca Lake to Encino on the valley side.

What did I find?

Here are the 10 areas with the smallest inventory* as of September 9th:

1. 90403 -- Santa Monica (between Wilshire and Montana) -- 2 months of inventory
2. 90402 -- Santa Monica (north of Montana) -- 3 months
3. 90212 -- Beverly Hills (SW) -- 4 months
4. 90404 -- Santa Monica -- 4 months
5. 90035 -- S. Robertson/S. Carthay -- 5 months
6. 90038 -- Hollywood -- 5 months
7. 90025 -- Sawtelle/West L.A. -- 5 months
8. 90024 -- Westwood -- 5 months
9. 90405 -- Santa Monica -- 5 months
10. 90004 -- Hancock Park -- 5 months

One could argue that these are the areas that are closest to the bottom -- if not already there.

Why do I say that? We are not likely to see a wave of additional foreclosures in any of these areas -- particularly with the declining interest rates, surge in loan modification and increased buyer activity. And because these are highly desirable areas with low inventory, significant further price declines in these areas are highly unlikely. I'm sure doomsayers will argue, but I think these areas are near bottom -- or there.

Now, the list of areas with the highest inventory is quite interesting. Here are the Top 5:

1. 90265 -- Malibu -- 32 months of inventory
2. 90069 -- West Hollywood -- 27 months
3. 90068 -- Hollywood Hills East -- 11 months
4. 90077 -- Bel Air/Holmby Hills -- 11 months
5. 90046 -- Sunset Strip/Hollywood Hills East -- 10 months

And one could argue that these are the areas (within my survey) that are the furthest from recovery and the most likely to see prices fall further. Those top two are striking -- 90265 (Malibu) and 90069 (West Hollywood). All I can say about that is "Yikes!" And I wonder if there's something else going on because those are way out of whack with the rest of these prime areas.

To see my entire chart of inventory in 34 different zip codes: CLICK HERE