The headlines have been full of doom and gloom relating to the real estate markets, but fortunately, most of the bad news relates to other areas of the country or the State, such as Riverside county in Southern California.
The last 3 months have seen a strengthening of the market, following a very weak first quarter of 2007. Prices are generally down a bit in the South Bay and the Palos Verdes Peninsula, and homes are taking longer to sell. Of those homes listed that have adjusted their original listing prices downwards, most of these were not properly priced in the first place. Some sellers are still reluctant to adjust to today’s “picky buyers”.
What I am seeing is an active market for well priced attractive properties. Properties that have a strange lay-out, deferred maintenance, poorly designed remodel, poor location or are significantly over-priced are sitting on the market. They have seen the greatest decrease in prices. When the price reflects the merits of the property, good or bad, it usually sells. Demand for well located properties is still strong. There have even been a few bidding wars. It is true: The Market Sets The Price.
Two of my recent listings sold within 3 days of being placed on the market. The three most important factors which led to their quick sales was sharp pricing relative to the competition; the sellers agreed to “stage” their property, and the homes were updated and well cared for. Both properties showed like a model home.
1. Home sales activity for the Palos Verdes Peninsula and the South Bay actually increased compared to the prior year.
On the Palos Verdes Peninsula, 289 single family residences were sold, compared to 240 for the first six month of 2006 ( a 20% increase). The inventory of homes, condos and townhomes as of 6/30/07 has also decreased 25% from this time last year on the Palos Verdes Peninsula. This equates to a little more than a 3.5 month supply. There are strong indications that the market is “bottoming out”.
For the Beach Cities ….Manhattan Beach and Redondo Beach also had increases in sales for the first six months of 2007 of approx. 13%, compared to the comparable quarter in 2006. Torrance and San Pedro, however, had slight decreases in sales volume during the first six months of 2007 of approx. 4%.
2. Home Prices (average price per sq. ft. ) in Palos Verdes sold during the first six months of 2007 showed a decrease of approx. 1% over the comparable period of 2006 (to an average price per sq. ft. of $591). Prices in other cities of the South Bay showed greater decreases over the comparable period last year, with decreases of 18% (Redondo Beach to $560 per sq. ft.) to 5% for Manhattan/Hermosa Beach ($763 per sq. ft.) and San Pedro($445 per sq. ft.), however the average price per sq. ft. for Torrance ($493 per sq. ft.) remained the same compared to the prior year.. Prices in the second quarter have improved, however, after a very poor first quarter of 2007.. Detailed market reports for the Palos Verdes Peninsula and each city in the South Bay can be viewed at my website http://www.maureenmegowan.com
3. Discounting? The discounting from asking prices that homes are selling at has increased, but this is as much a function of the fact that the homes were improperly priced when originally listed. Property has been taking longer to sell, with the average days on the market for properties to sell averaging approx. 40 day, however this is a substantial improvement from the first quarter of 2007 where homes were taking close to 70 days to sell, on average, in the South Bay.
4. Interest rates have risen recently, but remain at very attractive levels. Interest rates on 30 year fixed rate mortgages have increased about one half of one percent over the last quarter to an average rate of approx. 6.9%. The Federal Reserve Bank has stopped their increases in short term interest rates, however long-term rates have increased due to bond market changes as well as problems in the sub-prime mortgage markets which has led to lower interest by investors in investing in mortgage securities, which has led to an increase in the “spread” over underlying Treasury notes for mortgage rates.. Lenders are tightening their lending requirements, making it more difficult for buyers to secure such aggressive loans as 100% financing.
5. The market does appear to be stabilizing. 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 some media reports would lead you to believe.
Considering making a move? If you are thinking of selling, remember that the low interest rates attract buyers and they are cautiously returning to the market. We have a tremendous internet presence both locally and across the country. Don´t miss this very important sales tool. Most buyers begin there search on the internet today. I can also help you maximize your home´s best attributes for an optimal selling price and fewer days on the market. My website is filled with ideas to get your home ready, or it can be professionally staged. Now may be the best time for the foreseeable future to put your house on the market while rates are low and buyers are re-entering the market. In the future, interest rates may increase, possible tax reform measures are passed, or the market continues to cool.
Want To Buy A Home or Investment Property? For buyers, this is an excellent time to be in the market. Sellers are more willing to negotiate price and interest rates have remained low. 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.
Are You Waiting For The Market To Cool? Any advantage obtained by waiting for hopefully for prices to decrease longer than a few months may be offset by increasing interest rates, which are still near historically low levels.