163987AveSantaYnez_ (2) (Small)

Identifying Local Property Price Direction Changes

The simple answer is the economic law of supply and demand, coupled with the observation of various other significant though elusive factors that impact our housing market.

Table of Contents

Here’s What to Focus On

To get a good idea, when the level of homes available for sale divided by the recent average monthly rate of sales equals less than six, it usually would be an indication that the market is slightly favoring sellers. When that ratio reaches a 5-month level of inventory it definitely favors sellers. As long as that remains the case prices are very likely to have an upward bias.

Anecdotally, when buyers are showing signs of growing frustration, and when there is an increase in the number of multiple offers, the emotional climate is one that favors sellers.

The inquirer asked me how it was that most of the news he read or heard indicated that there was still a large “shadow inventory” of bank-owned or financially-stressed property owners and that these circumstances were still leading to lower prices.

What is “Shadow Inventory?”

There is a “shadow inventory” of homes that most likely will gradually come on the market over the next year. However, I think we have a strong enough local market that will readily absorb those few properties that will continue to come onto the market on a steady basis. Moreover, I have noticed in previous down markets that Pacific Palisades tends to lead many of the other areas in Los Angeles in the price recovery process.

There really are no easy sources or directions to look in to obtain such market information or turning points. It is much more a matter of observation and consideration of cyclical trends as well as being sensitive and alert to the emotional state of buyers and to the psychology of how that translates into real estate market impact.

Psychology of the Market Plays a Part

There is an identifiable psychological component as it relates specifically to sellers in any market environment. Sellers may tend to overreact with fear-driven reactions or have unrealistic expectations as to the current fair market value of their home.

When motivated by unrealistic expectations, owners frequently do not succeed in selling their homes, even in a market that is characterized by strong buyer interest and readily available financing that enables them to make purchases.

Not many people are aware that during the last 12 months approximately 50% of the Pacific Palisades homes that came on the market failed to sell or have not sold yet.

Don't forget to share this post!

On Trend

Popular Stories

Real Estate News
Risks in a Changing Market: Adapting Strategies for a Transforming Real Estate Landscape

Navigating the ever-evolving landscape of real estate demands astute observation and strategic planning, especially as indicators point toward an impending shift in the market. As we near the turn of the year, subtle yet significant changes are surfacing—a rise in inventory accompanied by a slower pace of sales, dwindling multiple offers, and increased renegotiations during escrow.

Read More »
Real Estate News
New Wildfire Disclosure Report

In Pacific Palisades, a region classified as a Very High Fire Hazard Severity Zone, the threat of wildfires looms large. Residents are continually encouraged to take proactive measures to safeguard their properties. Earlier this year, local fire department personnel conducted assessments of properties in brush areas, identifying those with excessive vegetation and urging owners to comply with clearance regulations. To address the need for a more systematic approach to assess property-specific wildfire risks, a groundbreaking tool called the “Wildfire Disclosure Report” has been introduced.

Read More »
Reverse Mortgages: Pros, Cons, and Alternatives

Reverse mortgages offer homeowners aged 62 and older a way to access their home equity, providing financial relief without having to leave their property. While these Home Equity Conversion Mortgages (HECM) can eliminate monthly mortgage payments, consolidate debt, fund home improvements, and supplement retirement income, they come with high costs, foreclosure risks, and potential impacts on government benefits.

Read More »