Wednesday, August 1, 2007

2nd quarter sales

LA Times L.A. Land blogger Peter Viles, citing a Santa Monica realtor, wrote today about "the complexity of the market and the statistics that attempt to capture it. Example: new statistics indicate the second quarter was stronger than the first for Westside real estate."

This brought comments like, "More sales in Q2 than Q1? I'm shocked to find out that summer still follows spring, which follows winter."

This graph of DataQuick statistics for Los Angeles County illustrates that. I've shaded the 2nd quarters yellow, consistently the peak sales quarter of the year. But the 2nd quarter of 2007 was 29% lower than 2006 (31,232 vs. 22,231 sales), and while previous Junes beat Aprils, 2007's was limp.

7 comments:

Mikey said...

It's what seasonal adjustments are for.

So, one way you could do this (among many) is average up, say, the prior 5 years of Q1s. You then average up the prior 5 years of Q2s. Then you divide the Q2 average by the Q1 average. Call this the adjustment factor (AF). The AF gives you the seasonal relationship between Q1 and Q2.

Then, you multiply the 2007 Q1 figure by the AF to get a comparable value for Q2.

The scam comes in when you pick and choose which number (adjusted or not) to use, based on whichever one is favorable for your position.

Anonymous said...

why are prices going up if the number of sales are going down?

Westside Bubble said...

Anon, if sales of lower-priced houses drop more than upper-priced houses, it raises the median price. That's why a same-house comparison like Case-Shiller is more useful, and it's falling.

Kate said...

Thanks for posting this!

It's bound to be a dramatic Q3/Q4.

Paris2LA said...

The perception that "prices are going up" seems widespread and is promoted by dataquick and other pro Real Estate industry sources. Even though the mix has changed (low end sales off 40% while high end sales only off 20%), one can still track actual price declines by looking at offer prices. LA is now dropping nearly 1% per month according to http://www.housingtracker.net/old_housingtracker/location/California/LosAngeles/?state=California&city=LosAngeles

rosebud said...

The westside data in the LA Times looks like a case of supply and demand. The total amount spent on homes on the Westdide in Q2 has risen from $732 MM in '02 to $956 MM in 2007. You just don't have as many people that can afford that average house, ergo a drop in units. Once supply builds up, the average price will start coming down... but if you look at areas like 90402 and 90403 (granted, a small subset of the Westside), there is no inventory; buyers have 30 homes to choose from, which is lower than last year and the year prior.

People in these areas are subject to different pressures than most of the market. Many feel no pressure to put their home on the market because they might miss a chance to make a million dollars; they already make this kind of money.

If Hollywood, tech and finance companies decide to move out of town, these areas will come back to earth. Even then though, with this low turnover rate, most residents obviously bought prior to 2002, and might not have any exposure to this bubble.

Anonymous said...

mikey: or you could just use a time-series analysis and filter out the seasonality...