Lenders have finally begun to loosen up underwriting standards for the approval of home financing. Many lenders are now willing to provide financing with 20% down in price ranges they had been limiting to 25% down. The widely-expected flood of foreclosure properties has never occurred in the Palisades. Many potential sellers have chosen to remain on the sidelines until prices show signs of increasing, thus limiting the inventory of homes available for buyers to select from.
All of the above may have finally tilted the scale in favor of local homeowners who desire to sell. For many years we had been accustomed to an average of about 20 homes selling per month in the Palisades. The sales level is historically somewhat lower in the winter months, and usually reaches the highest point in late Spring.
Where are we at?
As of February 1, 2012, there were 31 homes in escrow in the Palisades, and 16 had already closed escrow this year. With 90 homes now available for sale, there is approximately 5.5 months level of inventory at the current rate of sales. As has often been observed, anytime this level is below six months, the market begins to favor sellers.
Perhaps the most surprising observation we have made in reviewing the current Palisades housing statistics resulted from a comparison of the sales price per square foot during each January since the local market reached its peak in 2008.
In that year the average price per square foot of the 10 homes that sold in January was $1,050. As we all now know, prices began a steady decline during that year and each January thereafter showed lower prices. In January 2011 the 16 homes sold averaged $590 per square foot, reflecting the substantial market price adjustment that had occurred over three years.
The unexpected and intriguing observation is that in January 2012 the average price per square foot of the 13 Palisades homes sold increased to $767 per square foot, which is 30% higher than 2011. Though this is a positive sign, it is only based on a short period of time and a limited number of sales.
Where are we going?
Anecdotally, many agents have reported multiple offers with increasing frequency in recent months. For example, a new listing on Akron last month received close to 10 offers and ultimately opened escrow significantly higher than the original list price. Moreover, attendance at local open houses has been consistently strong even during the holiday period, with many new prospective buyers entering the market every month.
Most economists seem to be in agreement that by 2013 the nationwide real estate situation will have stabilized, and recent sales have indicated a couple of areas in the country already have felt three to five percent price increases. The Palisades has almost always led the Westside in market recovery cycles.