The nationwide housing recovery has steadily been improving for the past 12 months with home prices up between 8 and 10 percent as of January. Since bottoming out in 2011, the average price levels are now back to 2003-2004 levels.
The fuel for this steady recovery has been continued artificially low interest rates which has made purchases more affordable for everyone, combined with a lag in the homes being made available for sale at a rate equal to the steady and strong demand.
Pacific Palisades has seen an increase in median sale prices as well as price per square foot that is the greatest we have seen in seven years. With current inventory 26 percent below this time last year and new buyers continuing to enter the competition for limited supply of homes available, the average time on market has shortened by 15 percent on average and the prices have continued to experience upward pressure.
In fact, inventory levels are so low that it would take less than two months to sell all of the Pacific Palisades homes available below $5 million as of the beginning of April, whereas it would take over a year to sell all the Pacific Palisades homes available over $5 million.
The primary source of greatest pressure on our local market has continued to be investors seeking opportunities to either completely redo or build totally new homes to supply the steady demand. Other buyers who have begun entering the market are first-time buyers who do not have negative equity or have to sell one home before buying another. Many of these buyers have realized that they can own a home today for less than it would cost to rent, even in the Palisades.
It is interesting to observe that the number of “distressed sales” is dwindling, and there are fewer and fewer such homes for sale in the Palisades and other similar areas.
Another interesting point: the median list price in Pacific Palisades is $3.295 million, up from $2.5 million in 2012. This year’s first quarter is 32 percent higher than last year’s first quarter! The median sales price in the first quarter 2013 incredibly was 30 percent higher than the median sales price for the first quarter 2012, and was the second-highest first quarter in Pacific Palisades ever! This high average level is substantially due to investors competing with owner-users in trying to buy homes in the $1 million to $2 million range, thus absorbing the available supply at a much higher rate than we have seen in previous years.
Of course, there is no way to tell whether we are in another “bubble” that may last only until interest rates shift up and/or until a substantial number of new homes become available for purchase due to the higher price points that are now attainable for sellers. But it seems reasonable to suppose that at least some degree of significant price appreciation can be anticipated until such point as the market does level out.
More of Michael Edlen’s tips and information are available on MichaelEdlen.com. He can be reached via e-mail at Michael@MichaelEdlen.com or at (310) 230-7373 .
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