The Market Activity Index shown below is a measure of the number of months it will take to sell the average inventory of homes based on the average pace of sales during a given year. In general, three months or less of inventory suggests a Seller’s Market; 3-6 months a Neutral Market; and 6 or more months a Buyer’s Market.
Since January 2006, Laguna Beach has been a Buyer’s Market at all price levels with three exceptions: <$1M and $1.25M-$1.499M in 2006 and $1-$1.25M in 2007, which were Neutral Markets. 2006 and 2007 had similar market activity indexes except that in 2007 the index increased for properties over $3M, reflecting a stronger buyer’s market at the upper end of the market that year. Interestingly, the Market Activity Index for 2008 nearly doubled over that for 2007 for most price levels, which means that either inventory levels doubled for the same volume of sales or sales came in at half the rate for the same inventory levels or a combination of the two. In any event, 2008 was substantially more of a Buyer’s Market than it was for 2007 or 2006.
The most significant development beyond a doubling of the Market Activity Index for 2008 was the sharp increase in the index for properties above $5M in 2008. The $5M+ price level had an average of 55 months of supply of homes, which compares with 18.6 months of inventory for Laguna Beach as a whole. See graph and table below.
Market Activity Index = Months of Inventory
Market Activity Index – Laguna Beach (provided in tabular form)
By Price Level in $Millions
| 2006 | 2007 | 2008 | ||
| TOTAL | 8.1 | 10.3 | 18.6 | |
| <$1 | 4.9 | 6.5 | 10.6 | |
| $1-1.249 | 7.3 | 5.8 | 13.5 | |
| $1.25-1.499 | 4.4 | 8.8 | 17.7 | |
| $1.5-1.999 | 9.5 | 9.7 | 19.7 | |
| $2-2.499 | 8.1 | 8.1 | 16 | |
| $2.5-2999 | 16.5 | 15.8 | 22.4 | |
| $3-3.999 | 8.2 | 17.3 | 21.4 | |
| $4-4.999 | 10 | 22 | 16.9 | |
| $5+ | 12 | 20.7 | 55 | |
This report is based on data supplied by the SoCal, Sandicor, MRMLS, and DARMLS or their MLSs. Neither the Associations nor their MLSs guarantee or are in anyway responsible for their accuracy. Data maintained by the Associations or their MLSs may not reflect all real estate activities in the market. Information deemed reliable but not guaranteed. COPYRIGHT © Bankers Funding Company.
The Market Activity Index can be used as a tool to anticipate market trends including sales, inventory, and price levels. From this analysis, it would appear that the greatest price pressure in 2009 would be for homes priced over $5M given the high inventory levels combined with the relatively slow pace of sales within this price segment. It is important that buyers know the applicable Market Activity Index so that they know what would be a realistic and appropriate offer price — and the same is true for sellers so that they price their property in line with the market and market trends.
For specific questions or further analysis of the Laguna Beach market or any other market in Southern California, at specific price ranges, please contact me at 949-701-2000 or albierogers@firstteam.com.
