The market is much more balanced than the headlines indicate.
One of the most influential variables driving our local real estate market is inventory. The number of properties on the market (active listings) is down 52% from a year ago. In 10 of the 19 micro markets that we track on the westside of Los Angeles, fewer listings came to market and listings withdrawn from the market and expired listings were unusually high. Prices are determined by supply and demand and right now the lack of supply is counteracting the decrease in sales volume.
Less than four months’ supply of homes creates a seller’s market. More than six months’ supply of homes creates a buyer’s market. Currently the market is neutral. What is most interesting is the listings that are still selling are selling quickly.
Of the 257 closings this month, 46% sold within the first 30 days of being on the market. There is no disputing the evidence that good homes at a good price are still selling very quickly.
The following micro markets were up in sales activity June 08 vs. June 07: Beverly Hills, Westwood - Century City, Brentwood, Los Feliz, and Malibu Beach. In 10 of the 19 micro markets we track, sales activity was up in June 08 vs. May 08.
The median sales price across the 19 micro markets we tracked in June 08 vs. June 07 was down 10.8%, while the YTD numbers are up 4.9%. What is also very interesting is the sales price to list price ratios. On average, listings are selling at 6% off the original asking price and 4.4% off the list price at the time of sale. The following micro markets were up in terms of median sales price for the month of June 08 vs. June 07: Bel Air, Los Feliz, and Venice.
The following micro markets have experienced a YTD increase in median sales price: Beverly Hills P.O., Bel Air - Holmby Hills, Sunset Strip - Hollywood Hills West, Cheviot Hills - Rancho Park, Venice, Santa Monica, and Hancock Park- Wilshire.
In our local markets, many sellers have the financial ability to decide whether or not to sell their home in the current market environment. This fact contributes to the decrease in inventory in our market place.
Buyers continue to face lower inventory levels in most micro markets. There is actually a healthy competition for well-priced properties. The media headlines suggest inventory is swelling and buyers should be able to purchase a property from a distressed seller or through foreclosure. These situations in our local markets are practically non-existent. The big anticipated price drop many buyers had expected has simply not occurred. For a buyer, sitting on the sidelines is not without risk. While interest rates are slowly trending upward, they continue to be the silver lining in the market. With loan programs changing every day, it is very difficult to say which programs will be available, and at what cost, going forward.
Sellers are faced with the reality that the media continues to create a perception of a buyer’s market. In fact, the current inventory levels favor neither buyer nor seller. Sellers can take heart in the fact that buyers want to buy and multiple offers still take place for well-priced properties. Homes priced at “market value”, not feelings or false expectations, are still selling.
In summary…. Buyers and Sellers need to pay close attention to the real numbers, not just the headlines. The media’s coverage is largely based on macro trends, not on our local micro market data. Yes, we are in a different real estate environment when compared with the market of two or three years ago. At the same time, the market is much more balanced than the headlines indicate.
JUNE 2008 Micro Market Report