Friday, July 17, 2009

LA Times: "Southland Home Prices Looking Up"

Evidence that the local residential real estate market is stabilizing was front page news in yesterday’s Los Angeles Times. A bold-faced headline read: “Southland home prices looking up”.

Finally, the sunshine seems to be breaking through the gloomy clouds of news about REOs, short sales and delinquent, underwater homeowners. For a moment, it seemed like real estate was getting back its sheen.

The median sales price in the five county Southern California rose from $249,000 in May to $265,000 in June, an increase of 6.4%.

Southern California home prices may have finally hit bottom, with median values rising last month for the first significant increase in two years, new data show.

After drastic drops in equity, homeowners have reason to cheer the rise in prices.

There’s also a glimmer of hope in the local labor market -- the unemployment rate in Los Angeles County in June was 11.3%, a drop from 11.6% in May. The “green shoots” of recovery may indeed be on their way.

But there's still a big gap between sales activity in the low end of the market and the high end of the market.

Although prices have firmed at the low end of the market, they are still falling in affluent communities. [Los Angeles Times]

What does this mean in our local market? Lots of sales under $1 million and an anemic market over $1 million.

These two charts look at the single family market over $1 Million and under $1 million in Beverly Center - Miracle Mile, Hancock Park - Wilshire, Hollywood Hills East, Los Feliz, Silver Lake / Echo Park, Sunset Strip - Hollywood Hills West, West Hollywood.

Los Angeles Houses $1 Million + salesIn June, 7% of properties over $1 million (above) were under contract -- an increase from 3% in the worst part of the financial crisis -- but still half the sales level recorded in June 2007.

Los Angeles Homes Under $1 million - salesOn the other hand, there's been a boom in sales under $1 million. In June, 18% of homes in these areas were under contract, a 50% increase from the levels recorded six months ago and in June 2007.

The increase in activity on the lower end can be attributed to record affordability and low interest rates, and a continuous supply of well priced REOs and short sales. On the high end, the unavailability of financing coupled with buyers' diminished assets and income has made for a slow market.