Friday, June 15, 2018

Los Angeles Housing Market Finds Soft Support, Seeks Direction

- Intended for Students/New Analysts to Learn Analytics -

(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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