My tone about the Southern California market hasn't changed from my predictions over the last 2.5 years. For the first time in many years, housing prices in Los Angeles over a six month period actually showed a decline in value. While statistics can be manipulated, I will share that our brokerage arm, Beach Front Realty has seen a drastic slowing in the market.
Properties last year got many immediate showings and received plenty of offers. The listings now sit longer with little to no activity and buyers have become increasingly picky. The question on everyone's mind is does the market slow (to a soft landing as the California Association of Realtors and many other economists predict) or does a sizeable correction occur. For many reasons, I subscribe to the latter opinion.
Should values in real estate go in the direction that I predict, I believe that the regional economy and rental market will also suffer. That said, our portfolio is very low leveraged versus the current values and we'd expect to manage though difficult times. Over the next 6 months however, a majority of our portfolio will be coming off of three year fixed rate loans and will become variable. We are watching the market and will be in communication with you should we decide to initiate refinances.
