Chuck Ponzi January 19th, 2006

The focus of this post is information that has recently come out of of Dataquick Information Systems. We all know that for a long time that Dataquick has the most comprehensive and extensive set of information about the Southern California region’s real estate transactions. I always enjoy a good sound bite from John Karevoll. Both he and his organization are often expounding on the information they have; attempting to point a clear direction for the Southland’s real estate sector.

We all know that sales here are off dramatically from a year ago, and that the pace is still high historically. However, a few cracks are beginning to appear in all areas of our real estate - centric economy.

They have chronicled the mess of affordability in L.A. that currently stands at 11%, and have provided insight into where the market is going in the short term. But, real estate moves at a glacial pace. Saying where real estate is going to be when you have the most comprehensive data anywhere is just laying out the data in a plot, and drawing a trendline; it’s not rocket science. Can they predict long term trends though?

An article released on their website yesterday titled Southland home sales down, lower appreciation is telling in more ways than one.

Pay close attention to the turn from real estate cheerleader to warning sounder they have made in this article.

A decline from November to December is normal for the season. Last month’s sales
count was the lowest for any December since 24,913 homes were sold in December 2001. The Inland Empire bucked the regional trend and posted sales increases last month, led in part by record-breaking sales of newly-built homes. “The frenzied part of this real estate cycle is behind us and what we’re seeing so far is a normalizing of the market. Mid-market and entry-level homes are selling well, the move-up and prestige markets are leveling off. It’ll be interesting to see how this plays out between now and spring, ” said Marshall Prentice, DataQuick president.

It’s interesting that he thinks the frenzied part is behind us. Personally, I would say that the euphoric part is behind us and the nail-biting, gut wrenching part is just about to start.

However, this is where they make the full 180 from previous stances:

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,255 last month, up from $2,238 for the previous month, and up from $1,869 for December a year ago. Adjusted for inflation, current payments are about 2.6 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle.

OK, so now they are talking about real estate cycles, right? It seems hardly that you cannot read an article about real estate these days here in SoCal without the late 80’s to early 90’s being mentioned. This is because it is all repeating, but in a much more dramatic fashion than last time. And, anyone with memories of California older than 15 years knows what the downside is like.

Easing down or not, the fundamental shift in real estate over the past months has not been the prices or volumes, it has been insider sentiment. It’s not hard to see the turncoats turn.

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