Tuesday, May 12, 2009

Long Term trends for 5 zip codes

A coworker has been saving the DQ data since March of 2003. Sadly, the REIC pulls the data off after a new version is released.

But this data tells quite a story. Sadly, it has personal information so tied in with it, I haven't had time to scrub it. This is the *full* data set for LA county though.

Since I'm only interested in single family homes, that is all I will plot. Also, the data is on a bunch of excel spreasheets in varying formats, so there was quite a bit of effort just to sort out the data for a few zip codes. I have all the torrance zip codes... but whenever sales were low, it was "n/a" if the data was ugly and a high value if it showed what the REIC wanted people to see... Grrr...

I really think the graphs speak for themselves. But I'll still comment. ;) These are my first choice zip codes to buy into. Look at that sales graph! It tells us clearly this area is *not* done dropping.

90275 is my first choice zip code to buy into. As with Case Shiller, we can see that the price per square foot peak was in 2006. Just earlier than Case-Shiller!


















Look at the sales trends. Notice the long term decline? It looks like people were 'priced out forever' before this data series even started. This leads credance to the theory that the bubble really started earlier than many people suspected. Certainly earlier than I was aware.





















I've been curious which areas 'align' where I wish to buy. 90274 was easy too eliminate, its low sales rate and variety of unique (and pricey) properties had me cutting it first. But then I noticed that these three zip codes align on a price per square foot basis... Notice how they all align? So much for it being 'different here.'

















We're not ready to buy now. But this data strongly suggests that waiting is the best strategy. We hear the noise of the recovery... there might even be a blip. But the long term trend is clear. Prices and sales have yet to recover. Sales must recover 12 to 18 months before prices. So waiting is pretty safe. :)

I'm still shocked how 90275 dropped from 60+ sales per month to where 20+ sales in a month is considered something for the CAR to brag about. Note: All 5 zip codes should be seeing 20+ sales per month! Not one out of five! Most actually should be seeing 30+ per month... None are above that threshold (yet).


Now to take off the bear's hat. One truism that the bears have held is the downturn would be as steep as the uptick. So far, its at a much lower slope (I 'eyeballed 90275). Does that mean?:
A) 'green shoots' is sort of working...
B) The worst lies ahead
C) The theory was wrong

They say the 'trend is your friend.' Well, this is an interesting sales trend (same sales per month plot, with a few trendlines). The sales trendlines do look like they are approaching a singularity. This, to me, implies we're at or near the sales bottom. Certainly by next February. That isn't the same as a price bottom though.


7 comments:

The Anonymous said...

"Neil Said...The sales trendlines do look like they are approaching a singularity. This, to me, implies we're at or near the sales bottom. Certainly by next February. That isn't the same as a price bottom though."

FWIW - during the last downturn in DC (1990-1996), Prices bottomed in 1992 and stayed on the nominal bottom for 4 more years (they lost ground against inflation).

However, the sales bottom wasnt til 1996.

Not sayin we will see this now - this downturn is very different than the last - just wanted to point that out...

wannabuy said...

Hmmm... My own reply was eaten!

The Anon:

It will be interesting to see what happens. Last downturn here, the sales volume recovery was underway for 18+ months before the price bottom. We'll have to see what happens this time.

Got Popcorn?
Neil

wannabuy said...

1996

Mortgage delinquencies hit an eight year high; some market observers warned that the market “still has a long way to go.” By this time, close to 40% of the homes on the market in the San Fernando Valley were foreclosures.

Signaling a true turnaround, later reports described “buyers emerging in droves” even as prices were still falling. Yet realtors warned potential sellers that “this is not a time to overprice your property,” and forecasters were wary of a sustained recovery, noting that they had seen a few false dawns.

***

By the beginning of 1997, the market had pretty much bottomed and was on its way to a recovery. But just as prices continued to head up at the beginning of the downturn while sales volume declined, the reverse occurred at the end – sales volume picked up, while prices continued to decline a bit longer. Foreclosures continued to haunt the housing market into 1997, and even a little beyond.

This is from Bearmaster's excellent series of articles:
http://www.elliottwave.com/features/default.aspx?cat=mw&articleid=3171

Supply and demand suggests that the Buyers demand curve has dropped. The only way to increase purchase volume is to drop prices.

Oh... an increase in wages would lift the buyers demand curve. But the opposite is happening. Layoffs and wage cuts (or hours are being cut).

If history repeats... we could see a 50% price drop from now to the bottom in the highest end/most overpriced areas over the next 18 months!

I still think the bottom is February 2011. But... some of the BS shinanigans might push that way out.

Interesting times...

Got Popcorn?
Neil

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Catrina Rodgers said...

It's fun to see graphs that chart the trends in various economic factors. Real estate is one of those bellwether industries. Massive up or down swings affect everything else in the economy.


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