On Tuesday, I attended a presentation by Robert A. Kleinhenz, Deputy Chief Economist for the Callifornia Association of Realtors, to hear the forecast for Palos Verdes real estate. Although, Kleinhenz did not have information specific to Palos Verdes (because we need a minimum of 30 sales per month for their formulas), the Market Outlook was a good perspective on our overall economy nationally, statewide and then specifically the Los Angeles area. Please click on this link to view the entire Outlook/Forecast.
Here are some highlights: The real estate decline in the 1990s was due to economic reasons. Currently it is due to financial reasons. Unemployment for California in 2008 is estimated to be 6.5% with the largest losses in construction, financing and real estate; other sectors are showing growth. 2007 was the trough for real estate sales in California (-44%); the projection is a 12% gain in 2008 with a 31% decline in median price. Median price declines because low end sales were 76% of 2008 sales. High end sales which require jumbo loans have been difficult to get. “Lenders have cold feet and they are not lending”. For the last 40 years, average real estate appreciation is 12% when held for 5 years (see chart above).
The biggest takeaway for most of us was that the Palos Verdes Peninsula market is so unique that buyers who are looking at cold statistics cannot get an accurate assessment of our market by themselves. Buyers coming into the area who have read statewide or countywide statistics are unprepared for the “cold shoulder” they receive from sellers receiving their low offers. There are 4 different cities on the Peninsula, each with different areas and distinctive neighborhoods. Within those neighborhoods, some homes are new, some have views, some are on large lots, some have pools, etc. It is impossible to successfully use just square foot prices, or average/median prices. Buyers need a local Realtor to accurately interpret all the data and assist them in determining a market price for homes they are considering purchasing.
Chart courtesy of California Association of Realtors
