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What’s Happening and Who’s Making it Happen

Posted by Chrles Pence on June 27, 2014
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*(the year-over-year comparisons in this article are from January 1st-May 18th of 2013 and 2014)

The real estate activity for the time periods expressed for 2013 and 2014* are full of anomalies. The year-over-year statistics for the time periods expressed herein for 2013 and 2014 are as follows:

In Santa Monica, zip code 90402, the number of homes sold was down from 24 homes in 2013 to 19 homes in 2014 which represents a 21% decrease in the number of homes sold. The average time on the market was up 44% from 50 days on the market to a current 72 days on the market. The median sale price rose 24% from $2,901,000 to $3,625,000 in 2014. The average price per square-foot of homes sold was down -11.6%, from $939 per square foot to $910 per square foot.  In 2013, homes sold for 99.93% of their asking price and in 2014 homes have sold for 96.96% of their asking price. Currently only 18 homes are available for sale, north of Montana, a neighborhood with 2550 homes.

Comparatively, in south Santa Monica, zip code 90405, the number of homes sold, dropped 33% from 36 home sold in 2013 to just 28 homes so far in 2014. The median price in 90405 was only down 6% but the average selling price was up 7%. The average price per square-foot was up 25%.

The year-over-year numbers for the Pacific Palisades are as follows: the number of sales in 2013 was 106 homes as compared to 100 so far in 2014, representsing a 6% decrease. The average time on the market in the Palisades was down 21 percent. This trend indicates that homes are selling much faster in the Pacific Palisades than in Santa Monica. The median home price in the Pacific Palisades was up 12% and the average sales price increased by 23% year-over-year. An interesting statistic in the Pacific Palisades was that in 2013 homes sold at 100.75% of their listed price as opposed to this year which is only 98.04% of asking price.

In Brentwood, zip code 90049, the number of sales was down 17% year-over-year, from 76 homes in 2013 to 63 homes in 2014. The median price dropped 21%, while the average sales price increased 24%. The average days on the market has remained the same from 2013 to today.

In general 2014 has been a little quieter. The buyers seem to be a little more cautious. Buyers are still very concerned about value, but that can be trumped by finding a home that is in move in condition. Owner-user buyers are still the major competitors for builders who are always looking for homes to tear down and replace with a larger spec home. The large spec home market is still very strong, but there has been very little inventory. The majority of speculation homes are still selling during the construction phase or just as they are coming on the market. This is especially true north of Montana where most new construction projects are being undertaken by an owner user who is either building a new home or doing a major remodel to their existing home for their own personal use.

Here are a few of the most frequently asked questions these days:

What is the current buyer pool in Santa Monica?

We still have the ever present entertainment buyers. We also have an influx of foreign buyers, Europe, Asia, South America and Russia. The largest new buyer pool seems to be the young asset managers and money managers moving to Los Angeles from New York or those moving up, locally. This group of   buyers is, for the most part, are young families looking to live north of Montana and take advantage of the Santa Monica public school system. We also still have the predominant financial influence from family trusts, parents trying to distribute wealth earlier as well as parents trying to help their children get started in a great neighborhood with great schools, weather and public services. Many of these buyers continue to make all cash purchases or purchases with financing from private wealth management banks.

Are we in a bubble that is about to burst?

I think the simple answer is, the real estate market, in my 35 year career in Santa Monica, has always been cyclical, up-and-down-up, up-and-down-up. There will always be downturns, but they have always been followed by a bull market. Santa Monica, since the late 1980’s, has always been the last real estate market to go down and the first to go back up again. It is hard to predict international economic trends or economically influenced events but the local real estate market is still flush with buyers that are anxious to purchase homes. They are being thwarted by a lagging inventory of new homes coming on the market. I predict that the real estate market will continue to be strong for the foreseeable future if interest rates are stable and we don’t experience a cataclysmic world event.

Am I too late in the cycle to purchase a home, should I wait for the next up cycle?

When it comes to purchasing a single-family home I think we need to be reminded that the majority of house purchased are not solely bought for investment purposes. It is always a good time to buy a HOME! Now, is a really good time for first time buyers to purchase a home. Although land value has risen 50+% over the last few years the net effect allows buyers to get more home/improvement value now than before as more and more of the sales price is just the increase in the property’s land value. The most pressure on the real estate market right now appears to be on lot value properties and properties that are new or very newly remodeled, homes that are in move in condition.

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