Lower Supply and the Net Result is an Increasingly Strong “Seller’s Market”
In 2012, we experienced a seven percent growth in the number of sales, with median sales prices increasing by 13 percent. With only 52 homes on the market at the start of this year, it would take less than 2.5 months to sell all the homes available at the current rate. Thus, as of January 1, 2013, sellers have the most favorable market environment that we’ve had in several years.
With home sales exceeding new inventory for several months, it is no surprise that prices have increased on average by 13 percent, and five percent per square foot. 2012 was clearly a year of dramatic market changes, following the three-year period of substantial price correction.
Why Low Inventory the Order for the Day?
There are a few reasons for inventory being so low at this time. One is that some owners who have been leasing their homes rather than selling in the down market have not yet made them available for purchase. Another factor is that the level of purchasing by investors has significantly increased through 2012, putting pressure on the market in many Palisades and other Westside neighborhoods.
Additionally, banks currently own 14 Palisades homes, which have not yet been listed for sale. Also, close to 60 local homes are either in pre-foreclosure stages or already have had bank auction dates scheduled.
Looking Forward What to Expect
Looking forward, buyers are likely to experience a continuing high level of frustration in their effort to identify and succeed in purchasing a home. Although interest rates are at extremely low levels, which has made home purchasing much more affordable, these prospective buyers quite often find themselves being outbid by either all-cash buyers or by investors/developers seeking more business opportunities.
As could be expected, local sellers are likely to continue enjoying a very solid market in their favor for at least several months. Until interest rates and/or average price levels increase significantly, it is reasonable to suppose that the current strength of the buyer pool will be great enough to offset the seasonal increase in new listings that is about to begin.
Of course, each neighborhood has its own price dynamics, and the condo market has not behaved in the same way as single-family homes. Also, there are varying degrees of market balance between sellers and buyers at different price ranges.
Therefore, owners who may be considering selling property this year would do well to meet with an experienced local real estate agent to assess where their particular property fits into this picture before deciding on timing and price positioning.