The following was included in my quarterly real estate update newsletter recently sent to my clients:
1. Sales activity in the real estate market for the Palos Verdes Peninsula and the South Bay continued to slow during the 3rd quarter of 2006 compared to the prior year. For the Palos Verdes Peninsula, 141 single family residences were sold during the third quarter of 2006, compared to 171 for the third quarter of 2005 ( an 18% drop), however sales improved considerably over the 82 and 133 homes sold during the first and second quarters of 2006, respectively. The number of homes, condos and town homes on the market on the Palos Verdes Peninsula has increased almost 50% (to 339) during the 2nd and 3rd quarters of 2006, compared to the 1st quarter, but has been steady the last 3 months Much of this is due to seasonal activity, and inventory is still below the levels of prior years. Manhattan Beach and
Redondo Beach also had similar decreases in sales for the first nine months of 2006, compared to the first nine months of 2005, with 16% and 22% decreases in sales volumes, respectively.
2. Pricing of homes in Palos Verdes for sales during the first nine months of 2006 continues to show increases compared to the prior year, increasing 7.4% over the comparable period of 2005 (to an average price per sq. ft. of $596). Prices in other cities of the South Bay also showed healthy increases over the comparable period last year, with increases of 13% (Torrance) to 27% (Manhattan/Hermosa and Redondo Beach). Detailed market reports for the Palos Verdes Peninsula and each city in the South
Bay can be viewed at my website.
3. The discount from asking prices that homes are actually selling at has increased slightly, averaging 2.5% to 3% below list prices, with lower priced homes having less discounting. Property is taking longer to sell, compared to only 20 to 30 days during 2005, with the average days on the market for properties to sell during the 3rd quarter of 2006 of 30 to 40 days, but considerably down from the average of 55 to 65 days for the first 2 quarters of 2006,
4. Interest rates have dropped and fixed rates for jumbo loans have decreased about a half percentage point to approx. 6.1% since last quarter. Homeowners are beginning to refinance again due to the huge number of variable rate loans out there coming to expiration. The Federal Reserve Bank has given indications that they may have stopped their increases to short term interest rates, therefore mortgage rates may stabilize at or near their current levels. Variable rate mortgages are now attractive, particularly for 7 year adjustable mortgages. Lenders are also tightening their lending requirements, making it more difficult for buyers to secure such aggressive loans as 100% financing. Flexibility on loan terms, such as interest only payments, or fixed low payments with negative amortization are still available. Current interest rate news can be viewed at my web blog..
5. The latest economic forecast released by the UCLA Anderson School of Business on September 28, 2006, says that “prices, at least in California, probably won’t decline significantly anytime soon”, but expects home prices to be relatively flat for the next 5 years.
Basically, the market has returned to a more “normal” real estate housing market, with general equilibrium between buyers and sellers. Certainly, compared to the super-heated market of 2005, things have cooled down considerably, however this market is not a bubble bursting or a market of plunging prices which the media reports would lead you to believe. As noted above, the market data simply does not support such reports, and most housing studies conducted by reputable sources, have reached the same conclusion.
In summary, if you are thinking of selling, now may be the best time for the foreseeable future to put your house on the market before additional interest rate increases are implemented, possible tax reform measures are passed, or the market continues to cool. Let me help you!
For buyers, this is also a good time to be in the market while sellers are willing to negotiate price and while interest rates have dropped once again. It is a great time to be a buyer, as reasonable offers are receiving serious consideration by sellers, and the competition to buy the home of your dreams is back to a more normal market. For those waiting for the market to continue to cool, any advantage obtained by waiting hopefully for prices to decrease may be offset by increasing interest rates, which are once again near historically low levels