Are you trying to figure out the direction of the real estate market? In the Palos Verdes and South Bay real estate market we are in a transition. But to what? Here´s what’s happening:
Real Estate continues to show strength all along the California coastline. That being said 2008 will be a tough year and we should pull out in 2009. The really stressed areas will take longer. For buyers sitting on the sidelines, however, they should remember that trying to call the bottom of any market is extremely difficult, For those people buying a home to live in, and not as a speculative investment, they should be buying for the long term, and trying to wait until the absolute bottom of a market will lead to lost opportunities to buy the perfect home for you. The hot real estate market of a couple of years ago led to many disappointed buyers who, after finding the home of their dreams, were locked in bidding wars with other buyers and were unable to buy the home that they truly wanted. Today’s buyers market gives the savvy buyer the opportunity to negotiate a great price without the competition of multiple buyers competing for the same property.
Despite the mortgage woes and “doom and gloom headlines” relating to the real estate markets, most of the bad news relates to other areas of the Southland, the country or the State, such as Riverside County, Sacramento County, Las Vegas & Florida. The most severely hit areas are those that had a large amount of new home development. Price depreciation has occurred in these areas due to builders drastically cutting their prices in order to get rid of unsold inventory. This has therefore had a strong impact on home resale prices in areas near the new home development. Areas with limited new home construction, low inventory of homes for sale, and higher priced homes (such as the South Bay beach communities) have had a much smaller impact from the recent housing market turmoil.
California Real Estate statistics show that the average sales price of Homes valued at $1 million dollars and less, have decreased by 25%. Homes valued at $1 million plus have decreased on average only one-half of one percent.
What happened when the market collapsed in the early 1990’s is NOT what is happening now. Then, the market corrected from THE TOP ON DOWN following a large recession and loss of jobs, which is the EXACT OPPOSITE OF CURRENT CONDITIONS, which is due to the mortgage meltdown where over extended families were approved for loans that they could never pay back once the short term teaser rates expired. This time the bottom of the market is in trouble and it will take 3 – 5 years to get the supply and demand in balance.
What’s happening in our South Bay Cities?
Prices are generally down a bit in the South Bay and the Palos Verdes Peninsula, and most homes are taking longer to sell. The average number of days on the market for properties sold in the fourth quarter of 2007 in the South Bay is still only a bit over 40 days. Many homes that are not properly priced reflecting today’s market, continue to sit for sale, however. We have about a 5 month inventory at this time. Some sellers are still reluctant to adjust to today´s “picky buyers”, though more homes are priced aggressively.
Incentives – Some seller’s are offering to “buy down” interest rates and are either offering or are asked in the offer to help with closing costs. Staging homes is more important than ever. It is important to show a homes best attributes so the buyer gets a sense of real value in the home and feel a strong emotional connection. When buyer’s are holding back like many are now – something has to spark them into action!
Pricing – Too High, In the Middle, Too Low… What should I do?? When the price reflects the merits of the property, good or bad, the home usually sells. It is not always that clear but is more times than not. Demand for well located properties is still strong. Buyer’s also want as much remodeling completed as possible, unless they want to fix up a place and then the price needs to be appropriate. Today’s families are stressed with work and school schedules and generally prefer to buy a property that has already been remodeled. There have even been a few bidding wars for these type of properties. It is true: The Market Sets The Price.
1. Home sales activity for the Palos Verdes Peninsula and the South Bay actually increased compared to the prior year.Palos Verdes Peninsula – 533 single family residences were sold during 2007, compared to 527 during 2006 ( a 1% increase). The inventory of homes, condos and townhomes as of 12/31/07/07 has increased 9% from this time last year on the Palos Verdes Peninsula to 215 homes and condos/townhomes,. This equates to a little more than a 4.8 month supply. There are strong indications that the market is “bottoming out”.Beach Cities – Manhattan Beach and Redondo Beach had a modest decrease in sales in 2007 compared to 2006, however San Pedro and Torrance had an approx. 15% drop in sales compared to 2006.
2. Home Prices (Average Price Per Sq. Ft. )Palos Verdes – During 2007 prices showed an increase of approx. 2% over the comparable period of 2006 (to an average price per sq. ft. of $594). South Bay Cities – Most showed decreases over the comparable period last year, with Redondo Beach -6% ( $587 Sq Ft.), Manhattan/Hermosa Beach -2% ($778 per sq. ft.), and San Pedro -7%($437 per sq. ft.), with Torrance ($488 per sq. ft.) remaining the same compared to the prior year.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
Interest rates and Financing – Interest rates on jumbo 30 year fixed rate mortgages (loans in excess of $417,000 which are called “conforming loans”) have decreased a bit over the last quarter to an average rate of approx. 6.75%, but are significantly higher than conforming loans which are at approx. 5.75%.. Congress is considering passing a bill that would raise the conforming loan limit to approx. $675,000 for one year, which would enable many borrowers to obtain a mortgage at a significantly lower interest rate for a new home purchase or refinancing. Passage of this bill is not expected earlier than mid March. The Federal Reserve Bank has recently significantly cut short-term rates, however long-term rates have increased due to bond market changes. Problems in the sub-prime mortgage markets has led to less investors interested in investing in mortgage-backed securities (which provides funds to make new jumbo loans), resulting in an increase in the “spread” over underlying Treasury note rates for mortgage rates. Lenders have tightened their lending requirements, making it more difficult for buyers to secure 100% financing. FICO scores over 700 are expected.
How can you get prepared to buy or sell in this 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 still relatively low and buyers are re-entering the market. In the future, interest rates may increase, possible tax reform measures may be passed, and the market may continue 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.