Where NOT to buy right now in Los Angeles

Once again, I’ve crunched the numbers on single-family housing inventory in the prime zip codes of Los Angeles. And the numbers are very clear. The areas of town with the most unsold homes are unequivocally the very best areas of town.

For much of this real estate downturn, the best areas of Los Angeles were less impacted. But in the second half of 2008 – and especially the 4th Quarter of 2008 – that no longer remained the case. I wrote in December about how sales of the city’s $10-million-plus homes had dropped off a cliff since the end of July. (See HERE). But now there’s even more evidence that the best areas of town are suffering the most right now.

Here are the areas with the most unsold homes* calculated by the number of months it will take to sell them:

1. Malibu (90265) – 27 months of inventory
2. Beverly Hills (90210) – 26 months of inventory
3. Beverly Hills SE (90211) – 25 months of inventory
4. West Hollywood (90069) – 21 months of inventory
5. Bel Air/Holmby Hills (90077) – 20 months of inventory
6. Brentwood (90049) – 17 months of inventory

I hate to say it, but this kind of excess unsold inventory can only mean one thing: Downward pressure on prices.

Now, this does not mean there’s not some screaming good deals in these areas. There are. In fact, there are some great deals in these areas precisely because things aren’t selling, and I can point out a few deals, if you’d like.

But this also means you need to pay extra attention to what you’re buying in these areas. Unless you truly are getting a great deal, you might want to wait to buy because the general values of housing in these areas are likely still headed down.

And if you're selling a home in these areas right now, you're likely going to have to both lower your price AND do more marketing to attract attention. (Of course, that's what I do.)

Too many homes. Too few buyers. It’s simple math.
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*To calculate, I gathered the number of active listings for each zip code as of January 25, 2009. I averaged the number of monthly sales in October, November and December, and divided that number into the active listings. The source was the CLAW and SRAR multiple listing services.