In Escrow: 4209 Via Pinzon, Plus 2 Insights to Today’s Buyers

4209 Via Pinzon - High Res-004

After 2 months of solid activity, 4209 Via Pinzon is in escrow.  This is a great home and the buyers are looking forward to joining this great community.

There are 2 things we have learned over the last 60 days between agent feedback and comments during open houses and meeting with potential buyers that merits sharing, especially if you are considering buying or selling a home in the next 6 – 12 months.

  1. The market is still full of buyers, but they have grown more patient in the last several months.  This is evident in the increased time homes are taking to sell – not just in Valmonte, but throughout the South Bay and Palos Verdes.  With over 300 visitors through the house, it is clear that Valmonte is still generating a lot of interest, but buyers know what they want and are willing to wait for the right property at the right price.  4 months ago, there was half the inventory and a general fear that you may have to wait another 6 months to find a home if you don’t act quickly.  That has certainly changed.
  2. After 43% appreciation over the last 4 years, buyers are beginning to ask the question, how much longer can prices go up?  This is a rational and understandable question given homeowner’s memory of the market crash from 2008 through 2012.  My last post covered this topic in greater detail, but it’s worth addressing again.  A recent statement by CAR  Chief Economist Leslie Appleton-Young addressed the market by saying “I think we’re getting close to the peak of the market, but we haven’t really had a stellar recovery either.” She went on to address the potential for declines by saying “It’s really going to be more of a slow squeeze than a big drop.”  The market fundamentals are still in place for continued price appreciation, but history tells us that growth cycles typically last 4-5 years and we’re already 4 years in.

So what should you make of all this?  I’m advising my clients on the sell side that the window of opportunity to take advantage of equity appreciation is starting to wind down, but as long as interest rates remain low, there will still be plenty of buyers around.  On the buy side, I’m advising clients that if it’s the right house for your needs and it’s in your budget, it’s worth taking action.  And if the house has been on the market more than 90 days, the next few months may be the best time to take advantage of seller frustration and negotiate the price.

If you need help putting a real estate plan together, send me an email and I’ll create a customized plan for your needs.

Until next time…see you in the neighborhood!

 

Valmonte Late Summer Market Update: Did We Just See the Peak?

4209 Via Pinzon - High Res-004

4209 Via Pinzon, $1,450,000 (listed by Kyle Daniels, Ericson Beach Real Estate) http://www.liveinvalmonte.com

As we enjoy the remaining warm days and quiet evenings of another wonderful summer in Valmonte, it’s time to take inventory of the local real estate market and get an idea of where things are headed.  To put things in perspective, we have enjoyed over 43% in average sales price appreciation over the last 4 years.  These rising home prices have largely been driven by limited inventory and low interest rates, which further aided buyer demand.  But as this current growth cycle matures, the $100,000 question is how long can the market continue to rise?  To answer that question, I like to turn to three indicators that give us some historical perspective of what’s statistically going on with the market – month’s supply, list price to sales price ratio, and days on market.

History lesson: Market Cycles

In 2005 and early 2006, our last market peak, homes were selling on average 98% of the asking price in approximately 22 days.  In fact, in the market run up from 2002 through early 2006, homes were selling in an average of 19 days over that time period.  In addition, home prices appreciated 56% and inventory was much like it is today – tight supply with less than 2 month’s worth of inventory.  We can look to less stringent lending standards during that time period as one reason for the shorter days on the market, but clearly demand outpaced supply and sellers were willing and able to take advantage of that imbalance.  Of course, we all know what ensued -the market flattened out for a couple years before dropping nearly 30% over four years, before before seeing a recovery in mid-2012.

But here we are today, sitting comfortably in our newly appreciated homes and feeling pretty smart about our 43% price appreciation over the last four years.  During this growth cycle, homes sold on average in 64 days – three times the amount of time it took in the last bull market.  Months supply is roughly the same as the 2002-06 cycle with around 2 months of inventory available.  

How long will it last?

If you arelike most folks, the memories of the last market crash are hard to shake, and you’re thinking, “how much longer can prices continue to rise?”  Looking at 21 years of sales data from the MLS as our guide, we’ve seen three growth cycles since 1995, each lasting about 4-5 years, followed by 2-3 years of flat growth, then 2-3 years of declining values before the next growth cycle kicks in.  Getting deeper into the weeds, when we look at price/foot comparisons over the same time frame, prices grew over a 10 year cycle before declining for 6 years.  This tells us that the base price tends to expand and contract over a shorter time frame while price/foot changes over longer cycles.  What this means is that if you are a buyer during a down cycle, you are likely getting more home for your dollar while seeing a stronger appreciation if you can make some improvements leading into the next growth cycle.  Just as in stocks, buy low and sell high, right?

Nota bene!

It is important to note, over the last 20 years, the growth cycles have been stronger and lasted longer than the contractions.  And in most cases, price gains have outpaced declines by a factor of 2 to 1.  But if we really step back and look at the net results, if you held a property in Valmonte since 1995, you have enjoyed an average price increase of 192% and a price per foot increase of 178%.  Not too bad for living in a beautiful neighborhood with excellent weather, friendly neighbors, and great schools.

So to answer my own question, if you were to ask me to bet money on how much longer prices will rise, I will be inclined to tell you we are coming to an end of the growth cycle, and that more than likely, we’ll see a leveling out for the next couple of years before we see any downward momentum in home values.  What could change my prediction?  Without a mortgage debt crisis looming like we saw in 2008, the headwinds for price growth today are the potential for rising interest rates and the inability of recent college graduates to pay off student loans to free up more capital to purchase their first home.  When that next reality hits is anyone’s guess, but for now I’m going to enjoy the nice weather and finish a few projects around the house before cooler weather and the holidays come back around.

See you in the neighborhood!