I wish I had a crystal ball to tell sellers of real estate in Palos Verdes what price their home will sell for. There are the obvious variables – location, condition, amenities like views, etc. and the “forgotten” variables like the market perception of the buyers. As we have experienced, the media also plays a large part in the buyer’s mood.
As more and more buyers begin their home search on the Internet, they identify quickly a well priced home. Wouldn’t the seller want to be perceived as well priced when they first put their home on the market as statistics show that a home gets the largest audience/views within the first two weeks of being placed on the market. Otherwise, they risk becoming a stale listing, whittling away at their “high” price and losing potential buyers.
In this market, pricing is key and Realtors and sellers both need to “be brave” and price a home the same or less than the last comparable home that sold. The buyers ultimately set the price (not the seller or Realtor). The failsafe for a price that may be too low is that buyers will recognize the low price and multiple offers will result.
Lew Sichelman in a LA Times article, “To sell home, make sure the pricing is right” has several suggestions for sellers including “sellers need to know how fast properties in their specific market segment ae being sold…how much competition…and market statistics such as absorption rates…inventory…and days on market.” If you want your your home sold quickly, put on a buyer’s hat for a bit when pricing your home. Or you could, in effect, be “buying back” your home for yourself.
The self-fulfilling prophecies are right again according to the LA Times article “At the luxury end, home prices are falling.” The upper end of the market is feeling some pain. It appears misery loves company. Statistics are in for the month April and indicate some exclusive neighborhoods show decreased sales prices compared to April 2007. Palos Verdes real estate had mixed reviews.
Palos Verdes Estates (zip code 90274 which includes the cities of Palos Verdes Estates, Rolling Hills Estates and Rolling Hills real estate) showed an increase of 18% and Rancho Palos Verdes real estate (zip code 90275) showed a decrease of 18%. If you average those numbers, it shows the entire Peninsula holding. Remember, these are median prices for the month. The statistics for the past 15 months through April are available by clicking here.
Results to date for May show 262 Active listings (254 in April), 71 Pending (31 in April) and 27 Sold (39 for the month of April). Compared to last year, there are fewer number of homes sold but the prices in Palos Verdes continue to be holding (see the Average Price graph in the above link). And Days on Market for the month of April 2008 fell to 6.5% – 6% is considered to be a normal market.
This is still a buyer’s market with a great selection of homes and interest rates for a 30 year fixed jumbo loan at 6.75% and a 5 year fixed interest only loan at 6.125%. We never know when real estate prices have hit the bottom until the market is on the way back up. John Juarez, a realtor in the East Bay asks buyers, “What are you waiting for?…if you buy and hold your house for a few years (either live in it or rent it out), it is very likely that you will experience appreciation in the value of the house. It is highly likely that your real estate will go up in value if you pay attention to the basics of price, location and condition when you make the purchase”.
More good news is the LA Times ‘ article entitled, “Report finds weak economy but no recession” citing a Conference Board report released Monday showing that for the second month in a row, their leading economic indicators index rose 0.1%. “So far it seems as if the recession will be short and shallow” says Harm Bankdholz, economist with Unicredit Markets & Investment Banking in New York. I like that!
Today’s Los Angeles Times Real Estate Section reported the ten Southern California cities with the highest increase in sales prices for single family residences for the first quarter of 2008 compared with the same period last year. Both zip codes on the Palos Verdes Peninsula were on this list.
Palos Verdes Estates, Rolling Hills and Rolling Hills Estates (zip 90274) showed an increase in median sales price of 16.5% compared to the first quarter of 2007. Rancho Palos Verdes (zip 90275) showed an increase of 17.6% in median sales price compared to the first quarter of 2007.
Additional statistics for the Palos Verdes Peninsula can be accessed by clicking on the Statistics tab above. The first quarter of 2008 compared to first quarter of 2007 shows an increase in sales prices, more inventory and fewer homes sold.
The complete LA Times chart which includes cities with the “Biggest Losses” can be accessed by clicking here.
I can only imagine how the public feels regarding real estate in the Palos Verdes and South Bay areas with the news media’s seemingly conflicting reporting . Yesterday’s LA Times Business section headline, “March a cruel month – Foreclosures take over…” is only 8 days after the LA Times Business section headline, “Home prices staying afloat at the beach” (see my post “Now You’re Talking” April 8, 2008).
Let’s look at the new 5-page Facts and Trends reports (click here or go to the Statistics tab above)for the Palos Verdes Peninsula with data from January 2007 through March 2008. The number of homes sold 49 (Mar ’07) vs. 33 (Mar ’08), number of homes for sale 157 (Mar ’07) vs. 235 (Mar ’08), number of homes pending 37 (Mar ’07) vs. 33 (Mar ’08). It definitely shows a slowing compared to March 2007, but look at the months in between. March 2008 had more homes sold six out of the last seven months (November 2007 was higher with 35 homes sold).
What does it all mean? Real estate in the Palos Verdes-South Bay area is softer than last year but better than most of Los Angeles County. We are not seeing as many foreclosures as the rest of the County (which is driving the prices downward in those communities). Average sold price on the Palos Verdes Peninsula (as shown on the Average Price For Sale & Sold graph at Statistics tab) for March ’08 was $1,608,000 vs. $1,390,000 for March ’07. Of the 11 months in between, 6 months had average sold prices less than March ’08 and 5 months had average sold prices higher than March ‘o8.
For Sellers – Price your property realistically with no padding; look at the sales prices of the most recently closed escrows not prices of homes currently on the market. Robin and Eric Fenchel in their post “Ask Less and Get More: A House Priced Well Will Sell!” reiterate the dangers of overpricing.
For Buyers– This is your time. There is a lot of inventory and interest rates are at historic lows. Lending rules have changed so it is imperative that you speak to a lender for a prequalification and lock in a 30-day rate (many lenders believe that rates will be going up before the end of the year). An increase of 1% in interest rates decreases affordability by 10%.
Many Multiple Listing Services allow the agent to cancel/withdraw a listing and then relist it (even moments later) to make it appear as a new listing. I think this is a great marketing ploy but wrong. It then gives a skewed look at buyers’ reaction to that particular property. Kelly and Laura of Remax Palos Verdes call this “Churning and Burning”.
If a property sits on the market for over 30 days, it is overpriced for market conditions. The agent would better serve the Seller if they reduced the price of the property to reflect market conditions or withdraw it from the market. That may sound harsh but the purpose of listing a property is to sell it.
As an agent, we look at sales statistics, current inventory, conditions of home, etc. and give the Seller our estimated sales price. This is not an exact science as it cannot take into consideration a buyer’s emotional connnection to a particular piece of property which can favorably change the outcome of a sales price.
This ploy to relist a property as a new listing only “fools” the public. Most agents will search the History on a property that their client is interested in and will see it as a relist/reduction of an old listing.