When visiting with guests at my Open Houses, many times I hear the opinion that they should wait a little longer for market prices to drop because they expect another 'wave' of foreclosures to be relased by the banks.  Further discussion reveals that this belief is driven by what they read in the media at which point I explain that those reports are macro-based (i.e. California, Southern California, LA County, etc.) and have little bearing upon the realities of the Westside.

I came upon an article yesterday, April 21st that appeared on the front page of The Los Angeles Times with the headline 'California Home Default Cases Plunge'.  While this is great news in total, with such proclamations as:  

  • 'A 40.2% drop in the first quarter suggests that the foreclosure crisis is easing.'
  • 'The numbers suggest that the housing market won't be flooded by a fresh wave of bank reposessions, which had been seen as a major threat to the market's recovery.'
  • 'Banks have recognized that flooding the market with foreclosures weakens the value of the properties they have taken back and must resell.'
I'm spotlighting this article because its one of the few (if any) that give geographical context relating to the crisis and illustrates my assertion.  Some key points presented affirm that the crisis is rooted in areas far away from the Westside are:
 
  • 'Economists note that further gains statewide are jeopardized by continued high unemployment particularly in the Inland Empire and the Central Valley.'
  • 'Foreclosure activity remains concentrated in these inland areas, which suffer from above-average unemployment.'
  • 'If you get into the Inland Empire, Fresno, Bakersfield, Modesto, people are really struggling because the unemployment rate is so high.'
An analysis of foreclosure (REO) activity (for SFR and Condo homes) in the Southland areas where the crisis is based reveals a sharp contrast to the levels of Westside foreclosures:
 
         
                                            
 
 
                                         
 
This is not to say that the Westside doesn't have its own set of problems, for it does.   Unemployment and job security are issues here and many homeowners have been reluctant to list their homes due to depressed market values.   If anything, these factors are having a reverse-effect on market inventory.
 
In the past year, Westside inventory has declined across-the-board as sales pacing has exceeded new inventory growth.   Some of our micro-markets have evolved from a 'Buyer's Market' to a 'Seller's Market' (less than five-to-six months supply of inventory), which could apply upward pressure on pricing. Time will tell.
 
One factor however, that will not be present to influence pricing is the 'next wave' of foreclosures.