Is the Palisades Immune to Real Estate Market Corrections?

By MICHAEL EDLEN | Special to the Palisadian-Post

Whether one is hopeful of being successful in finally purchasing their new home or hoping to sell at the peak of the market, here is what you might need to know about the current market and looking ahead. This is not the market of a few months ago.

What is a “seller’s market?”

Historically, a real estate market is considered to be in balance between sellers and buyers when there is a five- to six-month supply of homes on the market, relative to the current rate of sales in a particular area and price range. Because the local housing inventory is still very low, with a two-and-a-half-month supply of homes available, we are still in a strong “seller’s market.”

However, we are now seeing greater buyer hesitation, fewer multiple offers being received by sellers, increasing numbers of escrows being canceled for a variety of reasons and more reductions in listing prices than we have had in many years.

What does this mean for a potential seller?

As inventory gradually continues to increase, with fewer buyers able or willing to try to purchase now that interest rates have increased again, it might soon lead to a market where the supply of homes reaches a four- to five-month level, and sellers will need to have much more effective marketing and negotiation skills at work on their behalf. It has already been harder for buyers to purchase a home, especially with interest rates having increased by 30% and prices of homes higher by 10 to 20% in the last year alone.

The timing for many sellers could be optimal during this phase of the market. There is a great sense of urgency for those buyers still able to be approved for financing to purchase a home now, which can still result in multiple offers if a home comes on the market while the supply is still low in that price range and area.

What does this mean for a hopeful buyer?

Even though interest rates have increased by more than 1% in recent months, and prices of homes have continued to increase month after month, this may still be an opportune time to purchase if you are committed to the effort. Although it is certainly possible that prices could soften once inventory reaches the range of five to six months’ supply in the neighborhoods of your choice, if interest rates increase by even only 1% more, your monthly cost of ownership could increase by 20%.

Eventually, if history does repeat itself even to some degree, prices in the Palisades could well dip 5 to 15% in a moderate correction, or more than that if the inventory level more than doubles in the next several months

Bottom line?

At this time, there are still great opportunities for homeowners and home seekers to make a move. By the end of the year, there may be more challenges for attaining the same desired results.

Contact us for a complimentary consultation about your situation and a review of alternatives that might help you achieve your goals: michael@edlenteam.com or 310-600-7422. Ask for our Senior’s Information Guide or our useful Seller’s Guide, sent either by mail or email.