Buyers and Sellers Still Far Apart

One of the things that's still keeping the real estate market slow is the disconnect between buyers and sellers.

And the folks at Trulia have come up with a great new tool to measure this: Search By Price Reduction.

Price reductions are all too commonplace in today's market.

Many sellers still have unrealistic expectations about the values of their homes. Or many are in denial about how far the market has fallen.

Many buyers, meanwhile, are afraid the market could still go significantly lower. They don't want to be the "sucker" who paid too much for a property while it was still going down. So if they do make an offer, many times it's much lower than the asking price.

This disconnect makes it hard to get deals done.

Trulia's new tool tracks these price reductions. They have found that 25% of homes on the market had at least one price reduction. And in the country's three heavyweight real estate markets -- New York, Los Angeles and San Francisco -- the average price reduction was 13-14%.

That's the average.

We asked Trulia to break things down even further for the readers of TerraFirmaLA and they did:

LOS ANGELES AREA PRICE REDUCTIONS*

Location	Listings With Price Reductions	Average Listing Price	Average Reduction	Average Reduction Off Original Price
Beverly Hills	28%	$3,900,983	$680,725	15%
Los Angeles	33%	$1,054,715	$143,135	13%
Manhattan Beach	25%	$2,107,261	$240,468	10%
Burbank	28%	$619,838	$69,200	10%
Santa Monica	28%	$1,499,881	$147,219	9%
Pasadena	31%	$1,053,590	$101,712	9%
Culver City	29%	$625,900	$56,486	8%

*As of April 21, 2009
SOURCE: Trulia.com

And of course that average reduction off original price -- 13% citywide -- is just the asking price. With almost nobody but nobody offering asking price these days, I'd guess most properties are selling upwards of 20% below seller's original expectations -- or more.

That's a big gap between buyers and sellers.

Very Few Bright Spots

Only six zip codes in the areas of Los Angeles we are regularly tracking showed an increase in sales in the First Quarter of 2009 compared with the Fourth Quarter of 2008.

This is pretty surprising to me, especially given that the holidays are a slow selling period and we had a near total economic class in the fourth quarter.

But the numbers don't lie. Here are the areas with the best average monthly sales increase in Q1 2009:

1) 90210 - Beverly Hills - 29% increase
2) 90068 - Hollywood Hills - 10% increase
3) 90026 - Silver Lake/Echo Park - 10% increase
4) 91601 - North Hollywood - 5% increase
5) 90064 - Cheviot Hills/Rancho Park - 4% increase
6) 90039 - Silver Lake/Atwater - 3% increase

That's it.

No other zip codes in the areas we cover saw increases. Maybe home buyers in the best areas of Los Angeles are still too afraid. Or prices are too high. Or both.

Areas in Los Angeles with Relatively Low Housing Inventory

There are a few areas in the core Los Angeles area where single family housing inventory is currently relatively low.

Now, we’re not talking rapid selling hot spots like the good ole days. But these areas all currently* have housing inventory of 5-7 months:

90026 – Silver Lake/Echo Park – 5 months
91601 – North Hollywood – 5 months
91607 – Valley Village – 5 months
90039 – Silverlake/Atwater – 5 months
90004 – Hancock Park – 7 months
91316 – Encino – 7 months
90035 – S. Robertson/S. Carthay – 7 months
90064 – Cheviot Hills/Rancho Park – 7 months

*Active SFRs as of April 22, 2008
SOURCE: Original Research from CLAW MLS

Californians Using Up Housing Tax Credit

Eight weeks into the $10,000 State of California tax credit – and the money is rapidly being used up.

Homebuyers have apparently flocked to the tax credit. According to the California Franchise Tax Board, already $40 million of the $100 million allocated for the tax credit has been spoken for.

At this rate, the tax credit will be completely gone by July 15th.


The great thing about this tax credit is that it can actually be combined with the $8,000 tax credit the federal government is giving out.

When you consider these two tax credits, plus the super-low interest rates, in many cases you might be better off to buy a new home now than to wait for prices to fall.

We all know that when you’re buying a home, you’re really signing up for a loan. So your total costs – cost of the loan, tax benefits – when buying a home are more important than small changes in the actual purchase price of the home.

For more information about the California Tax Credit: CLICK HERE

Forbes' New Luxury Housing Index

Forbes Magazine has created a new "Luxury Housing Index" to track the real estate market in the 500 most expensive zip codes in the U.S.

Forbes rightly points out that most housing indexes cover too many segments with too broad of a brush. As we know, all real estate is local. Or as they point out about San Francisco:

• The San Francisco MSA, for example, might be down 20%, but that number includes prices in the city of San Francisco, where properties generally hold their value; Vallejo, a bankrupt city in the North Bay; Oakland, which has been devastated by foreclosures, and depending on the index you use, San Jose--a city of over 1 million people on its own.

Forbes says they plan to update it weekly. But as I've repeated time and time again, it really only makes sense to track these things quarterly. Their first chart proves the point. One month moves are totally misleading:

Los Angeles Housing Inventory’s Scary Outlook

For the best areas of Los Angeles, sales in the 4th Quarter of 2008 plummeted – along with the stock market, consumer confidence, the number of Americans with jobs and the entire global economy.

So the massive oversupply of single-family homes in these areas in Q4 ‘08 probably wasn’t surprising. (See HERE.)

But this year, we’ve got a new administration, the banks have almost-free money and some of them (Wells Fargo) are actually using it to make loans.

But how are things going this year in Beverly Hills, Malibu, Bel-Air, Brentwood and the like?

Not good.

That is, at least from an inventory standpoint, for the most part, the supply of unsold homes has grown.

Malibu continues to have the most number of unsold homes on the market relative to the average number of sales occurring per month. There is 40 months of inventory in Malibu. This kind of massive number (6 months is good) typically suggests two things: 1) Prices are still headed down in Malibu, 2) Recovery is still a ways off.

The same can be said for: Santa Monica (especially North of Montana and between Wilshire and Montana), Venice, Bel-Air, Beverly Hills and West Hollywood.

Here are the areas with the most unsold inventory:

CURRENT INVENTORY

Location	Zip	Active Listings*	Months of Inventory*	Months of Inventory (at the end of January)
Malibu	90265	334	40 months	27 months
Santa Monica (N. of Montana)	90402	57	34 months	7 months
Venice	90272	113	31 months	11 months
Santa Monica (Wilshire to Montana)	90403	20	30 months	14 months
Bel-Air/Holmby Hills	90077	109	30 months	20 months
Beverly Hills	90210	231	26 months	26 months
Beverly Hills SE	90211	23	23 months	25 months
West Hollywood	90069	131	22 months	21 months
Hollywood Hills West	90046	155	21 months	10 months
Santa Monica	90405	49	21 months	8 months
Pacific Palisades	90272	174	20 months	13 months

*Active SFRs as of April 22, 2009
**Single Family Residences
SOURCE: Original Research from CLAW MLS

I'm sorry, but those numbers are downright scary.

However, here's a few points to make.

Santa Monica has been hit really hard with an oversupply of houses relative to very few sales. It went from good to bad quickly. At the same time, 90402 and 90403 are small, desireable areas so it's possible for these small areas to turn around quickly. For now, Santa Monica isn't headed in a good direction.

Venice appears to be rapidly climbing up the oversupply, but in my own opinion, having looked at a number of houses in the area over the past year, I think there's fewer desirable properties compared with a year or even six months ago.

Beverly Hills saw a big increase in sales in March and there's been a few high-dollar sales (including what had been the best house on the market, IMO.) We'll see if the positive news in Beverly Hills becomes a positive trend...

Malibu. Oh, Malibu. Prices will have to come down, down, down there. If anyone has any rational argument as to why Malibu prices are not headed off a cliff, please let me know.

Finally, two truisms:

• There absolutely are some crazy good deals out there.




• There are ways to sell your home even in this market. It just takes some special strategies.

Los Angeles housing inventory rising

It's time for another quarterly update of single-family housing inventory around the core parts of Los Angeles.

And not surprisingly, there's not much to like in the numbers.

Readers of this blog may know that I like to track real estate numbers on a quarterly rather than monthly basis.

Overall in the core areas we cover -- downtown to the ocean and the southern San Fernando Valley (Toluca Lake to Encino) -- inventory is up 15% over three months ago.

In some areas, the numbers are quite dramatic:

• 90405 Santa Monica -- up 58%
  
• 90024 Westwood -- up 45%
  
• 90403 Santa Monica -- up 43%
  
• 91607 Valley Village -- up 33%
  
• 90210 Beverly Hills -- up 29%
  
• 90077 Bel Air/Holmby Hills -- up 28%
  
• 91602 Toluca Lake -- up 25%

Obviously, these kind of increases do not bode well for suggestions that prices will stabilize in these areas in the short term. These kind of inventory increases suggest prices may still be headed down in these areas.

In my next post, I'll examine the inventory numbers relative to sales figures for the three months of the year to give even better insight into where the market is headed in the best areas of Los Angeles.

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