Wednesday, March 20, 2013

Inventory Update

I haven't posted in ages (I promised I would shut down this blog once I bought a house, which I did last year), but recently got a request to revisit the inventory situation in Long Beach and thought I would put some numbers to what I'm seeing on the street.

To wit: as of February, there were 447 homes for sale in Long Beach -- an abysmal 57.7 percent reduction from this time in 2012.

As you can imagine, this has created quite a feeding frenzy.  Median list prices are up 38.6 percent from last year -- nearly 10 percent of that since January 2013 alone -- indicating this reduced inventory is emboldening sellers.  But this boldness is being rewarded, as properties are closing for 100.1 percent of these greatly inflated asking prices.

As a result of this inventory squeeze, in my area I have seen absolute dog shit sell for huge premiums.  It's insane.  According to Zillow (so take it with a grain of salt), my house has seen an 18 percent increase in value since I bought it in 2012.  That figure sounds crazy, but keep in mind I bought well (I should hope so, given all the time and energy I spent educating myself about real estate and writing this blog) and Zillow's estimated price-per-square-foot is consistent with recent sales.

Not surprisingly, I'm starting to hear more talk of another bubble forming.  But before we start using the B-word, don't forget that lending has tightened significantly -- other than FHA peeps, there aren't a whole lot of underqualified buyers anymore.  My guess is this is a bubble, but a flight-to-quality bubble, meaning today's buyers have money, are planning to stay put and aren't buying just any old poo-pile with intentions to immediately flip.  Quality buyers seeking quality properties and stable quality of life.

If values go down from here (it's certainly possible if rates go up or inventory explodes, but I think rate increases will just scare more people into taking action, and in premium areas there are plenty of sellers dying to gobble up any additional inventory), I just don't think we're going to see a rash of foreclosures like we did in the aftermath of the Great Housing Bubble.

As far as inventory, I don't think even the most bullish person out there predicted the banks and government would have been able to keep supply so artificially repressed for so long.  I know I kept anticipating an "inventory tsunami," but at this juncture that seems highly unlikely.

I mean, it makes perfect sense:  Kill supply and demand skyrockets (and neighborhood values go up, making any remaining struggling homeowners suddenly above water).  So the .gov and banks should do whatever it takes to make that happen.  And as long as the powers-that-be can keep it up -- and honestly, why wouldn't they be able to at this point? -- this will be the New Normal.  Sucks eggs, but that's just how it is.

But what happens when inventory increases -- is the inverse true?  Will prices drop through the basement?

Not in premium areas, apparently.  Belmont Shore inventory is up a whopping 57.7 percent from last year (to be fair 2/2012 didn't have a lot of listings, but still) yet asking prices are up 45.6 percent.

"But El Bee, an asking price is just that -- it doesn't mean they'll get it."

You're right.  They're not getting those prices -- the sale-to-list percentage in The Shore is four percent HIGHER compared to last year!

Yowza!  That means people are getting full-asking prices and then some -- despite the increase in inventory.

Like I said, flight to quality.  With today's practically-giving-money-away interest rates and the significant reduction in prices from just five years ago, people are able to buy a lot more house for a lot less money.

I realize this is a pretty bullish post, and that as a newly minted homeowner I'm incredibly biased, but this is just what I'm seeing and hearing.

I'm very curious to hear what experiences you've had recently, especially those who are currently looking or have been outbid.

I miss all of the readers and killer input.  I hope all is well with all of you.


  1. I was shocked to fianlly see a post from you! Glad that you fianlly found a home. I gave up on Long Beach and chose to buy in Temecula as I work from home and can pretty much live anywhere. I got a 2300 sq ft home with an unimpeded view of hills/mountains for 300K(std sale with many upgrades already in the home! 3 car garage to boot.) I do not know how this recent frenzy is going to end, but I sleep comfy at night knowing that my mortgage is 900.00/mo and I have lots of scratch left over to live and invest/save. No way that would have happened buying in the LBC! Best of luck to you and try our Temecula wines when you have an opportunity to venture out here. The qualiy is improving and it's a beautiful area. Cheers!

    1. Some natural beauty there for sure and hopefully the area does not get overdeveloped in your lifetime so you can continue to enjoy it.

      Personally though I am a wuss when it comes to heat so would not want to live there. Plus I hate driving.

  2. Dr Housing Bubble has visited the topic of shadow inventory" many times.
    What's listed on the MLS has little relevance to what the banks are actually holding.
    They're dribbling out properties in an attempt to keep prices up, and their balance sheets from going down the toilet.

  3. BTW....glad to hear you're in a house.
    Now you have to turn it into a "home"!

  4. Did you follow the saga of this house?

  5. I'm a lifetime resident of Long Beach (52 years), and also a lifetime renter.

    Every time I wanted to buy a property either some life event impacted my financial well-being (e.g., job layoff and protracted unemployment periods three times in 15 years), or I simply got outbid and didn't land the property I wanted (e.g., I've finished as a runner-up on 17 properties in Long Beach). The timing of my readiness to buy has been absolutely terrible at times. It seems like I've missed every "down market" opportunity.

    Although I'm weary of the chase, I'm still in the game and always looking for the next purchase opportunity.

    However, I'm about 10-12 years away from retirement, and like the writer from Temecula, may head to another locale rather than remain in Long Beach once I'm retired.

    I've thoroughly enjoyed the frank, witty, and clever prose that you've written throughout each of your blog posts. There have been times that I've telephoned friends / prospective buyers and read aloud your posts to them just for the sheer entertainment value. Bravo, well done! Flat out terrific writing from start to finish.

    Congratulations on your home purchase. I hope your property and home is all that you wish it to be.

    All the best to you!

  6. Good to have you back, mate! Though you're right, this is a bullshit post. Even as a homeowner (3 of them), I'm scared shitless. Nothing makes sense. Same thing with the stock market. Ack!

  7. El Bee,

    Congrats on the home!

    I was actually thinking about you the other day, when I smelled some oldschool weedsmoke emanating strongly the car in front of me, which smelled like "the kind", and wondered how you must be a real Long Beach oldschool person to have known that term (hadn't heard it used since 1980).

    Anyways, my condo that I purchased a year and a half ago for 202K is now worth (according to Zillow) 337K! :-D

    I am in the downtown area, and have significant hopes that it will continue to improve, and maybe with the breakwater being removed, this might become an incredible spot (ok, maybe I'm dreaming/smoking).

    I'm certainly no expert on real estate (though your blog helped me tremendously), but the way I see it, every beach community north and south has SIGNIFICANTLY higher priced real estate. If we ever get our act together here, along with some gentrification, I would think that prices have a lot of room to go up here... and as a homeowner, that would bode very well for folks like me.

    Anyways, later..

  8. I love your writing style and language. Keep up the excellent and high quality writing :)

    David | Lethbridge Real Estate

  9. Dave in Alamitos BeachWednesday, July 17, 2013

    Oh wow, another post! Even if I'm months late. I can attest to the crazy bubble prices and mania going on. In my corner of Alamitos Beach, crappy duplexes of 1200 square feet total are being listed for over half a million bucks. I looked at the place and there is no yard whatsoever, security cameras everywhere and a "view" of a parking lot across the street. Lovely! I really hope you'll think about coming back and reblogging. It was one of my favorite sites.

  10. This is a very interesting article. We all know that overall housing sales are down across the nation but to see homes in Belmont Shore selling for over the valued price is almost crazy. Even more interesting is that the median square footage selling price is lower than the median square footage list price. It doesn’t seem to match up. Maybe I need to sell a house in that area!

  11. El Bee, if you ever wanted to revisit and do a listing for fun, I'm thinking the most expensive one in the history of Long Beach would be it -

    Come on El Bee, give us your take please!

  12. Congrats on the house. Can't say much about inventory, but love living in Long Beach. The weathers great and the home prices are reasonable (for Cali) as well.