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Seller’s Advantage Continues

As of May 1st, 2013, there is approximately a one-year inventory of homes available above the $5million level.  Conversely, it would only take 2.5 months to sell all of the homes below that level.  As long as the inventory level is below 5 months, it is generally considered to be a market that favors sellers.

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Where Are We at Right Now?

A review of inventory levels as of the beginning of May year by year, reveals that 2007 was the last year that there were fewer than 90 homes for sale. Some of the factors contributing to the significant strength of the current market are fewer foreclosures and short sales, unabated demand from developers competing for limited opportunities, and highly qualified buyers needing little to no conventional financing.

In the month of April alone, 29 Palisades homes closed escrow. This was the highest number of sales for the month of April since 2006 and reflects a likely continuation of the strong market for many months to come. As long as overall interest rates are kept artificially low, the market strength is likely to persist unless there is a substantial increase in the number of homes available for purchase.

In addition to enjoying steadily increasing values, sellers have been experiencing other benefits. For example, sellers have greater leverage to negotiate more favorable terms than they have for almost 7 years. Also, there is a far greater probability that an escrow will close today. From 2008 to 2011, an average of only 76% of all Palisades escrows opened actually closed.

For the past 12 months, 90% of escrows opened have closed. The majority of those escrows which have fallen out have failed because of property inspection issues, rather than the commonly believed failure to obtain financing.

Where Does That Leave Us?

These significant shifts are further verification of the underlying strength of the seller’s position in today’s real estate market. In fact, because many sellers feel they have such an upper hand in this market, they are often not as willing to accommodate the buyer’s requests during the investigation process.

The main reason financing is far less often an escrow challenge is the remarkably high number of current Palisades home buyers who are literally all-cash purchasers. Some of these buyers have funds available from homes they have already sold, others have substantial savings and highly appreciated investment portfolios, and some are beneficiaries of sizeable estates or trust funds.

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