We are often asked, “How is the market doing now? Where do you see it headed?”
The M.L.S. sales data for this year shows that the Palisades home values have increased 12-17 percent as compared with 2012. This is the result of a 24 percent increase in the number of sales and inventory declining by 28 percent so far this year. A few observations can be made to illustrate the significance of this information.
During the past twelve months there were 76 Palisades sales less than $1,500,000. The lowest home available today in Pacific Palisades is a 2-bedroom, 2-bath 1,700 square foot home priced at $1,535,000. This is probably the first time in history that the inventory is all above $1,500,000!
Moreover, even though actual sales prices have increased by approximately 15 percent, the median average list price today is 25 percent higher than last year at this time. It could be said that many listings are priced too high for the current market levels. This is reflected in the fact that the number of new escrows opened in September (30) has dipped from an average of 46 for the first eight months of the year. Also, only 27 escrows closed in September, which was the lowest September closing since 2004.
Anecdotally, the frenetic energy that characterized most of the Palisades marketplace during the first half of this year has diminished substantially. There are fewer multiple-offer situations and usually with fewer participants when they do occur.
For example, we recently put a home on the market just below the level we expected it to sell at with the belief that it would have three or more offers and increase approximately five percent in price. Many agents even commented that they expected this outcome. However, the seller only received one written offer and two other verbal assurances of strong interest that never materialized.
Buyers are Becoming More Conservative
Clearly, the buyers are beginning to be more conservative and many are resistant to competing in price levels beyond what they feel is reasonable or what the home might be appraised at. Obviously interest rates are still incredibly favorable, yet not sufficient to compel a buyer to pay 10 percent more than they can possibly justify.
Based on the assumption that home loan interest rates will increase at some point in 2014, the affordability of homes will proportionately become less. Despite the shortage of sufficient homes for sale, it may be predicted that the rate of price increase will gradually slow and perhaps even level out completely before 2016.
For sellers, this time is a great opportunity to realistically price a home and benefit from the strength still remaining in this market. Correspondingly, as long as interest rates remain near historic lows, this continues to be a great time for buyers who are fortunate enough to succeed.