Friday, June 15, 2018

Los Angeles Housing Market Finds Soft Support, Seeks Direction

(Click on the image to enlarge)
The LA housing market made multiple attempts to break out but the rally steamed out on all of those attempts, retracing to a broad range of $775K to $825K, albeit with a slightly declining momentum. Both trendlines are confirming the sideways, as well as the declining momentum. 

As I recently wrote (see the link below), what the top-line univariate analysis produces - usually the industry standard - must be used with a grain of salt. It must be tested and validated, at least, by a normalized trend, preferably by way of multivariate analysis or regression modeling.

The normalized trend (bottom chart) is at variance with the primary trend. While it remains range-bound between $550 and $600/SF, it does not exhibit any declining momentum; instead, it has been forming soft support at $550, repeatedly bouncing off that level. Of course, in order for the LA market to turn bullish, it needs to robustly cut through the $625 resistance. Better yet, it should simultaneously eclipse the $825K (top-line) resistance as well. 

Note: This analysis covers the City of Los Angeles, not the entire Los Angeles County.

- Sid Som, MBA, MIM
President, Homequant, Inc.

Why Top-line Univariate Champions Must Always be Challenged

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