The Following Article is from the Winter 2010 Newsletter
For the last three or four years North Santa Monica had been strolling along, seemingly unaffected by the housing meltdown around the world. The inventory of homes for sale was increasing, but not at an alarming rate. Homeowners that HAD to sell were few and far between. If a buyer wanted to own a home in Gillette Regent Square or anywhere north of Montana Avenue they had to “step up” and pay what was required, to encourage the owner to sell. It wasn’t until the economy and the banking systems began to fail that values in the area started to respond.
As the financial turmoil came to a peak in the fall of 2008, we saw the highest sales prices ever recorded for new construction and lot value properties north of Montana. The larger newly constructed homes were selling upwards of $5.5 million and lot values were selling for upwards of $2.5 million. In the spring of 2009 things changed. From January thru June of 2009 the average sales prices north of Montana dropped, on average, 16.5%. Land value was hit the hardest with a declining of approximately 25% because lenders wanted nothing to do with builders or new construction projects. The only new construction money available was either very expensive private money, or came from private bankers lending to high net worth individual depositors. In other words, they were lending clients their own money.
The number of homes for sale during that six-month period increased to approximately 58. Too many appeared high, given that in the spring of previous years, the inventory had dropped to 5-6 homes for sale. To put things into perspective, at the peak, in the spring of 2009, there were 58 homes for sale out of a total of 2,532 properties. This represented 2.29% of the total number of homes north of Montana Avenue. In 1994, there were 215 homes for sale in the same neighborhood, which represented 8.5% of the total properties.
By the beginning of 2009, contiguous neighborhoods, like the Pacific Palisades and Brentwood, had already seen a drop in values of 30% and 22% respectively. Why the lag in a downturn in north Santa Monica? There are several reasons why I think Santa Monica nearly escaped the downturn all together.
First, many of the residents are wealthy and don’t have to sell to resolve a change in their living situation. Many that didn’t need to move just stayed put, others just said, “lease it and we’ll sell when the market recovers”.
Secondly, for the first time it was the same for many builders, instead of selling and taking their lumps they leased the home hoping for better days. Last year we did 54 leases!
Thirdly, the available inventory for sale has driven the demand up. Some telling statistics: Only 47% of the homes that came on the market for sale over the last 36 months have sold, the rest have been withdrawn from the market. In the last seven years, the number of homes sold north of Montana has dropped from 190 down to 72 in 2009. With fewer homes to choose from, buyers competed more vigorously for the homes that were available.
By June of 2009, the buyers began returning to the market in Santa Monica, driving the home inventory back down into the 26-29 homes for sale range. In the spring of 2010, sales activity was brisk for the saleable homes, leaving only the over-priced homes by summer. There are still many buyers in the marketplace looking for their dream homes but they will not overpay, they would rather wait until they can find a home they like, priced at today’s market. Of the currently available inventory, only 15-20% are priced in a competitive range that would attract one of today’s serious buyers. Today’s REAL buyers are very savvy and are willing to pay fair-market value; they are generally not bottom feeders expecting the unreasonable.
All in all our market is solid. Properties that need to be sold, need to be “priced to market value” to sell. If a seller will only sell “if we get our price” or wants to “test” the market for that “perfect” buyer, they should not enter this market, as it will prove to be very frustrating and unproductive.
The most important information a seller can have entering the market today is the chart that follows. There are NO homes that are an exception to the following statistical information. The following chart indicates the correlation between what a property sells for in relation to whether the property needed ANY reduction from its original asking price before it sold. Keep in mind that the statistics in this chart only reflect SOLD properties (remember, currently only 47% of the properties that enter the market for sale actually sell).
On the Westside, in the $2 million-$3 million price range, 209 homes sold WITHOUT a price adjustment, 174 homes sold but needed at least one price adjustment, however large or small. The homes that sold WITHOUT any price adjustment, sold on average, for 4.5% more than those that required ANY price adjustment. They also sold in an average of 42 days as opposed to 174 days for the properties requiring a price reduction. The average differentials for all homes sold, in all price ranges on the Westside, was 8.77% higher prices and 75% fewer days on the market for homes that were priced-to-value. As you look at the chart some price ranges are substantially more affected, in the $3 million-$4 million price range the differential is 17.56%. As you can see, pricing a property to sell is critical in this market if your expectation is to get the highest price in the shortest period of time. Around 90-95% of all multiple offers happen when the property is priced at or below market value. Contrary to public opinion, homes that are listed below market value sell with multiple offers, many well above market value and in some cases, as much as 10-15% over market value.
For any further questions about market conditions in your area, or a detailed plan for getting you home sold for top dollar and purchasing another home, please call us at 310-500-1288.