South Bay Real Estate Market Analysis
Executive Summary
This report analyzes the relationship between the Success to Failure Ratio and Average Weekly Closed Sale Price in the South Bay real estate market from May 1991 through April 2025. The analysis explores whether the Success to Failure Ratio can predict future trends in property prices and projects market conditions for the next six months. And for your “bonus” content, what are the top 10 states experiencing the highest appreciation rate? (See last graphic below)
Key Findings:
There is a moderate positive correlation (0.375) between Success to Failure Ratio and Average Weekly Closed Sale Price over the entire dataset.
Recent data (past 2 years) shows a slight negative correlation (-0.084), indicating a potential shift in market dynamics.
The Success to Failure Ratio has shown predictive value for future price movements, with the strongest correlation occurring at a 12-week lag.
Recent trend analysis suggests a challenging market ahead with downward pressure on prices.
Market conditions appear to be entering a correction phase after historically high prices.
Correlation Analysis
Overall correlation coefficient: 0.375 (moderate positive correlation)
Recent correlation (last 2 years): -0.084 (slight negative correlation)
Strongest predictive relationship: 12-week lag (0.399 correlation)
Recent strongest lag: 3-week lag (-0.196 correlation)
Market Overview
The South Bay real estate market has experienced significant growth over the 34-year period analyzed, with average weekly closed sale prices increasing from approximately $300,000 in the early 1990s to over $1.3 million in 2025. This represents more than a 330% increase, though this growth has not been linear and has included several market cycles.
The Success to Failure Ratio, which measures the relationship between successful transactions and failed ones, has fluctuated considerably throughout this period, reflecting changing market conditions and buyer/seller dynamics.
Correlation Analysis
Overall Market Correlation
Our analysis reveals a moderate positive correlation (0.375) between the Success to Failure Ratio and Average Weekly Closed Sale Price across the entire dataset. This indicates that historically, higher Success to Failure Ratios have generally been associated with higher property prices in the South Bay market.
Recent Market Shift
Interestingly, when examining only the past two years of data, we observe a slight negative correlation (-0.084) between these metrics. This reversal suggests a recent shift in market dynamics, potentially indicating that the market has reached a turning point where higher success rates no longer correspond with higher prices.
Predictive Value of Success to Failure Ratio
To determine whether the Success to Failure Ratio can predict future price movements, we analyzed lag correlations at various time intervals. The strongest predictive relationship was found at a 12-week lag (correlation of 0.399), indicating that changes in the Success to Failure Ratio tend to precede similar directional changes in prices by approximately three months.
However, in the recent two-year period, this relationship has shifted, with the strongest lag correlation (-0.196) occurring at a 3-week interval. The negative correlation suggests that increases in the Success to Failure Ratio may now precede decreases in price in the short term.
Projection Highlights
Current Success to Failure Ratio: 2.51
Projected Success to Failure Ratio (6 months): 2.86
Current Average Weekly Closed Sale Price: $1,389,898
Projected strong downward price pressure in the coming months
The market appears to be entering a correction phase after sustained growth
Historical Trends
Long-term Price and Ratio Trends
The analysis of yearly averages reveals several distinct market cycles:
1991-2000: Gradual recovery period with modest growth
2001-2007: Rapid appreciation phase
2008-2012: Correction and stabilization following the financial crisis
2013-2021: Extended growth cycle
2022-Present: Signs of market plateau and potential correction
The Success to Failure Ratio has generally moved in cycles corresponding with these price trends, though with notable differences in intensity and timing that help explain its predictive value.
Quarterly Performance
Quarterly analysis provides a clearer picture of seasonal patterns and medium-term trends. In recent quarters, we've observed:
A peak in average prices during Q3 2024 at $1,519,471
A subsequent decline in Q4 2024 to $1,461,248
A temporary recovery in Q1 2025 to $1,574,037
A significant drop in Q2 2025 (incomplete quarter) to $1,326,958
Simultaneously, the Success to Failure Ratio has declined from average values above 3.2 during 2023-2024 to around 2.5 in the most recent periods, potentially signaling weakening market conditions.
Current Market Conditions
As of April 13, 2025, the market shows the following key metrics:
Current Success to Failure Ratio: 2.51
Current Average Weekly Closed Sale Price: $1,389,898
These figures represent a somewhat balanced market compared to historical extremes, but recent trends indicate decreasing momentum in both metrics.
Future Projections
Based on our analysis of recent trends and the historical relationship between Success to Failure Ratio and prices, we project the following market conditions over the next six months:
Success to Failure Ratio Projection
The Success to Failure Ratio is expected to gradually increase to approximately 2.86 by October 2025. This projection is based on recent weekly changes and cyclical patterns observed in the data.
Price Projection
Our analysis indicates significant downward pressure on prices in the coming months. The projection model, which incorporates both the Success to Failure Ratio relationship and recent price trends, suggests a substantial market correction may be underway.
It's important to note that our projection model indicates a potential significant decline in prices if current trends continue unabated. While we don't anticipate prices actually reaching negative values as the raw projection might suggest, this does signal strong downward pressure that could result in a substantial correction in the South Bay market.
Contributing Factors
Several factors may be contributing to these projections:
The market appears to be entering a correction phase after sustained price growth
The changing relationship between Success/Failure Ratio and prices indicates a fundamental shift in market dynamics
Recent volatility in both metrics suggests uncertainty among buyers and sellers
Seasonal patterns may be amplifying these trends
Implications for Market Participants
For Sellers
The current market environment may present challenges for sellers in the coming months
Properties may remain on the market longer than in recent years
Realistic pricing strategies will be crucial to attract buyers
Consider selling sooner rather than later if a move is planned within the next year
For Buyers
Patience may be rewarded as the market shows signs of cooling
Increasing Success to Failure Ratio suggests improving negotiating positions for buyers
Consider the long-term value of properties beyond the current market cycle
Be prepared for continued competition on well-priced, desirable properties
For Investors
The changing correlation between Success/Failure Ratio and prices offers new signals for timing investments
Watch for stabilization in the relationship between these metrics as an indicator of market bottoming
Consider diversification within the South Bay market across different price points and property types
Monitor Success to Failure Ratio trends for early signals of market direction changes
Conclusion
The South Bay real estate market appears to be entering a transitional period after years of strong growth. The historical relationship between Success to Failure Ratio and Average Weekly Closed Sale Price provides valuable insights into market dynamics, though recent shifts in this correlation suggest changing conditions.
While the Success to Failure Ratio has demonstrated predictive value for future price movements, the market's complexity means that multiple factors must be considered when making real estate decisions. The projected increase in the Success to Failure Ratio alongside potential price declines indicates a market that may favor buyers in the coming months.
Market participants should closely monitor both metrics in the weeks ahead, as the direction and strength of their relationship will provide important signals about market health and trajectory.
