A murmur of optimism fluttered the hearts of local realtors, homeowners, home sellers and other watchers of the economic landscape late last week when SRAR (Southland Regional Association of Realtors), the self-described “voice for real estate” in the San Fernando and Santa Clarita Valleys, reported that the median price of a SF Valley resale home increased 5%, or $25,000, in February over January this year. And the number of sales rose 11% over January, too. Those are the first monthly increases since last August.
Those with a vested interest in the market would love to think so. Mary Funk, for example, President of SRAR, says this in the organization’s press release:
“…it’s easy to see why some people believe that now is the time to jump back into the market, that now is the time to buy a home, before the tide turns, before they have to compete with many more buyers.”
But many other observers are skeptical. They point out that median Valley condominium prices dropped 10.3% in February from the month before, even though there were slightly more sales. And that foreclosures made up close to half of the SFR sales. And that at the end of February there was a 15-month supply of homes for sale at the current pace (a six-month supply is considered the nationwide norm).
Comments posted on the topic by the avid, astute readers of the L.A. Times’ popular real estate blog LA Land were almost unanimously pessimistic. Many accounted for the price increase with the ever-popular “dead-cat bounce” metaphor; one reader even posted the definition returned by Googling it: “a term used in market economics to describe a pattern wherein a moderate rise in the price of a stock or any financial market item follows a spectacular fall, with the connotation that the rise does not indicate improving circumstances.” Another frequent commenter, “Cal,” gave this succinct advice: “Just watch volume and inventory … it tells you much more about the market health than median ever will.”
Probably the safest observation came from LA Land reader “Marc,” who wrote: You cannot have a “trend” with 2 data points. Statistics 101. If there are 3 successive monthly increases in the median, then there is an upward trend…”
Even SRAR’s own executive vice president, Jim Link, cautioned that “It may take many more months to work out all the problems caused by the collapse of the subprime mortgage market and the mistakes made by buyers who purchased beyond their means.”
The best Link could say, in a statement uncharacteristically tentative for SRAR, was that “maybe, just maybe, the worst is past.”
Until we see solid numbers on how the market performs in March and on through spring, we’ll just have to keep holding our breaths – and our shovels: we may need them to bury a dead cat.