Tuesday, February 24, 2009

Where's the Million Dollar Market Heading?

Home Sales Hollywood Hills West Hollywood Beverly Center Hancock Park

(click chart for more detail)

Where's the market heading? Are sales picking up or are they slowing down? This chart attempts to give a snapshot of one market, an aggregate of four Los Angeles neighborhoods:
  • Sunset Strip - Hollywood Hills West (Area 3)
  • West Hollywood Area (Area 10)
  • Beverly Center - Miracle Mile (Area 19)
  • Hancock Park - Wilshire (Area 18)

This market is neither the Westside nor the East side, but covers a swath smack in the middle of Los Angeles. The median sale price in this area was $1.10 million in January 2008, declining 8.3% to $1.00 million in January 2009. It's neither REO-land nor ultra-luxury territory, but captures the under $1 million and over $1 million market.

Here's the way to look at this chart. If the 12-month moving average (green) trends above the annualized 3-month moving average (pink), sales are declining and the market is "slowing down". If the 12-month moving average trends below the annualized 3-month moving average, sales are increasing, and the market is "picking up".

2008 was a mixed bag. From April - October, sales were in an uptrend. During the rest of the year, sales were in a downtrend.

For the first six months of 2008, sales were above the end of 2007 levels following the first credit crisis in September 2007. The uptrend that began in January 2008 (improving 'confidence' in the market) continued through June 2008, and then reversed.

The December 2008 and January 2009 datapoints reflect the economic wipeout of September and October of 2008. All signs are that this market is still decelerating. No huge surprise. (Consider that as of yesterday, the S & P 500 index was down 25.3% since the beginning of the year!)

Two trends are apparent from this chart: 1) the consistent overall slowing of the market -- a 29% decline in sales volume from January 2008 to January 2009, and; 2) the consistent volatility of the market, which speeds up and slows down, and like, the equities market, consistently surprises us with its unpredictable course.

Jamie Adner