The Pacific Palisades real estate market closed out June in spectacular fashion: the average price of a single-family home sold through the first six months of 2013 was a robust $2,875,930. This is about 16 percent higher than the average for all of last year, 21 percent higher than the first half of 2012 and nearly the same as the peak pricing at the market highs in 2008. This is an extraordinary turnaround and reflects a market that continues to gain momentum. In our current market, multiple offers and sales prices over asking price are often the norm.
Not only are prices appreciating, more homes are selling and selling quickly, on average about 30 days quicker as compared to a year ago. A total of 162 homes have sold (closed escrow) in the first half of 2013, 36 percent more than in the first half of 2012. We should have no difficulty exceeding the 277 homes sold last year, representing the most sales since 2007. However, to keep this portion of the recovery in perspective, it should be noted that between 1997 to 2006, at least 300 homes sold per year, and over 400 homes sold in ’98, ‘99 and in ‘02.
In June, 36 homes sold (closed escrow) in the Palisades, the most active June since 2007, when 37 sold. These 36 sales averaged a price of $3,565,134, an average size of 3,746 square feet and on lots averaging 13,670 square feet. That equates to a price of $916 per square foot as of June. Several high-end sales, including closings at $12.9 million, $15.35 million and $17.5 million added a boost and slightly inflated the local average price this month.
Low inventory figures were a contributing factor to price appreciation in the first quarter of this year. However, I do not believe that this is still the case as there are 86 active homes on the market, not exactly slim pickings, especially considering that there were 57 homes on the market in January. A total of 130 homes were available for sale this June, 58 percent more than the 81 homes available for sale in January. The total supply of homes is calculated as the overall number of single-family properties that could have been purchased in a given month, as opposed to a snapshot of existing inventory on a specific day of the month. The market is simply rapidly absorbing most new homes that are coming on the market.
There may be a perception of tighter inventory, however, as many buyers quite simply can’t buy today at the same price as they could have a year ago. That realization, along with a market appreciating at about one percent per month, has, in many cases, motivated buyers to act quickly on properties that meet their needs. Since many families are looking to live in this community and take advantage of our excellent local schools, there is stiff competition resulting in multiple offers on most listings. As agents seeking additional purchase opportunities for our clients, we have found that “pocket listings” (homes not advertised or in the MLS) have become more prevalent. We maintain a database of almost as many pocket listings as there are active listings.
Last year we saw many homeowners waiting to put their homes on the market, believing that prices would continue to appreciate. As these owners have realized more equity over the last several months, they are placing their homes on the market. This trend should continue over the next several months, especially as those owners who may have once contemplated “short sales” slowly creep into positive equity positions.
There was a fierce market for new building opportunities and a very high demand for “tear down” properties in the first half of 2013. Builders and owner-users for these properties seem to be literally lining up, and most of these types of properties are sold in multiple-offer situations, often well over asking price. As the land value for these “tear down” properties continues to increase, move-in condition homes on similarly sized lots have followed suit, thus creating a sort of “trickle-up” appreciation effect.
A possible curb to the market recovery could be the recent increases in mortgage interest rates. Rates on 30-year, fixed-rate home loans spiked 0.53 percentage points to an average of 4.46 percent in the last week of June—the largest weekly increase in more than 26 years, according to mortgage giant Freddie Mac. While rate increases may slow some of the recent rapid appreciation, unless there is a dramatic spike it should not be enough to curtail the long-term recovery. Rates are still at historic lows. We are likely in the middle innings of a long recovery, and the prospect of higher rates may actually induce buyers to enter the market in the short term.
We expect sales figures and prices to remain strong as we head into the fall. If inventory continues to increase, buyers will look harder to find values and both buyers and sellers should be encouraged by the persistent recovery. Both parties know that they are buying and selling in a competitive market and can expect multiple offers. Sellers should be reminded that buyers will always still seek to find their dream homes at the best possible value and buyers should put their best foot forward with clean offer presentations to stand out in this competitive market.
Jeffrey Sandorf is a Partner in Amafli Estates, a Pacific Palisades real estate company. Contacts: (310) 625-4099 and www.AmalfiEstates.com.
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