To me this means that there is a clear lack of supply and that there really is healthy demand out there. I'm even seeing some of the "location discount" properties go into escrow as the lack of supply combined with low interest rates and a healthier economy is pushing buyers to absorb even subpar inventory due to a lack of alternatives and the sheer "cheapness" of this low end supply. You can call me crazy, but next time a decently located, properly priced property comes onto the market in 90405 I challenge you to go to the open house. Observe the serious buyers all excitedly looking over the property and then get ready for multiple offers to come in.
Next, let's switch gears and head up to 90402 (both NoM and Canyon). There are 16 properties on the MLS in the entry level price area (which I will define as under $2.5mm). Of these 16 properties, 10 are in escrow. This equates to 63% which is no doubt lower than the 79% we observe in the lower end 90405 but it is still quite respectable.
Again, to me this all adds up to a lack of supply and a clear demand for more supply by buyers. This is keeping prices pretty stable. The low rates and growing economy are helping as well. Inventory is of course seasonal, and there will no doubt likely be a healthy increase as we get into spring, but I think it is unlikely we will see enough of an increase to overwhelm the clearly pent up demand and cause prices to deteriorate by a meaningful margin.
This inventory situation is playing out in many other places across the country. This recent Calculated Risk post shows that existing home inventory is now at its lowest since early 2005 and is back to a healthy 6 months of supply at the current (low) sales rate. Those sitting around hoping for a flood of properties to hit the market and push prices down seem more and more likely to be disappointed. I am not calling this an especially strong market, nor do I see prices rising materially, but I am a lot more encouraged by what I see going on than I have been in some time.
I agree...low inventory and low rates are really heating things up. I have never seen such high numbers of people going through open houses...60-70 people with 2-3 hours.
ReplyDeleteI have a friend who wanted to put an full price offer in on a redone house in the 90405. Only to have the agent pooh-pooh it as it was expected to go for 50-75K over asking.
Its the ol' supply vs. demand economics at work in the marketplace.
As much as certain economic indicators don't point to a healthy housing market...Santa Monica seems to have weathered the storm and prices have not tumbled as expected.
I think the smart money will now look to the 90404 - homes by the incoming metro line coming in the next 4-5 years. That will be where the real opportunity lies in SM.
"I think the smart money will now look to the 90404 - homes by the incoming metro line coming in the next 4-5 years. That will be where the real opportunity lies in SM."
ReplyDeleteI'd rather walk an extra 1/2 mile. Anyone waiting for gentrification to significantly change that area will be waiting a long time.
"As much as certain economic indicators don't point to a healthy housing market...Santa Monica seems to have weathered the storm and prices have not tumbled as expected."
ReplyDeleteWith a 20-25% drop in prices plus rates being where they are, we've experienced a pretty big drop in the monthly nut.
"Of these 14 properties, 11 are in escrow. That means that 79% of the inventory below $1mm is currently in escrow in 90405. Even more amazing is that the 8 lowest priced properties are ALL in escrow."
ReplyDeleteAnd we're in early winter.
Prices at the lower end are now quite competitive with rates on rentals since rents have increased substantially and mortgage rates are so low. It seems ludicrous to say this when the economy is still limping along, but there is every sign of a solid year ahead in the local market barring a market crash related to Europe.
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