Looking For and Finding The Silver Lining


“I sound like a broken record”, my mother used to complain when I was growing up, and  I am feeling this way myself since I must be the only one reading these economic reports in their entirety and gleaning the positive data.  All you have to do is turn on your television, laptop or flip open a newspaper and the headlines are repeatedly negative.  Take the Data Quick numbers released this morning for example.  The headline is that sales and prices are down year over year.  This is then interpreted as more bad news for real estate and distressed sales, the report goes on, are increasing as a percentage of total sales.  Blah, blah, blah.  Anyone who is paying attention already knows that these numbers are going to be bad as they are being compared to the government “tax credit” subsidized sales of last year.  Naturally we should expect the numbers to be off.

So what then are the positive numbers, if any, in the Data Quick report?

Here goes: First and foremost are the price points that show increased sales numbers.  Say again? You mean there are price points that are actually showing strength?  Yes there are and in fact it comes from two areas specifically.  Sales of Southland homes in the low end, that is under $200,000, is up from 28.8% of the market to 30.6%.  In other words, lower end sales are a greater portion of the overall marketplace.  This is important on several fronts.  The fact that less expensive homes are moving, is good because it means both investors and first time buyers are actively purchasing.  For prices to stabilize, first time buyers need to be actively purchasing; someone has to buy the less expensive homes so that those sellers can move up.  Further, since distressed sales often fall in this category their absorption by investors and eventual removal from the market is also very important to overall inventory stability.

The second group of sales that showed stability was those Southern California homes priced over $800,000.  Sales in this price category were basically flat as compared to last month as well as year over year.  This is tremendously important because if the upper end is dropping, it puts tremendous pressure on the middle.  That is, if I can buy in Malibu or Beverly Hills for the same price that I could buy in the San Fernando Valley, then those Valley areas will have to come down in price, which in turn puts pressure on the outlying areas and so on.  Moreover, Data Quick reports that when using an alternative method of analysis that compares mid to high end sales by zip code, they show that sales are running slightly above their ten year average: 37.4% today vs. 37%.  Contrast that with January 2009 when the more expensive areas represented just 26,2% of all sales.  These numbers cannot be interpreted as anything less than a picture of normalization in the housing market.  Normalization in housing, has a nice ring doesn’t it?

Clearly numbers can be evaluated and conclusions drawn that are not rosy and I am not suggesting that the market is normal yet and that all the news is good.  Obviously the middle, between $300-800,000 needs to strengthen.  And yes, lending is tight and short sales are increasing as an overall percentage, but the silver lining that I see is also not tinted by rose colored glasses either, but rather gleaming as a ray of hope and optimism against a sea of troubled waters.  And as with any silver lining, you just have to look for it.

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