A Market In Transition? Third Quarter Market Analysis

Thursday, 6 Oct 2011, 4:46:00 AM

Michael Edlen

As we enter the final quarter of 2011, and take a look at the Santa Monica market so far this year, some noteworthy observations can be made. There have been some recent articles in different publications that report “another dip in home prices due to high foreclosure rates and weak demand.” Another suggested that, “home prices in a majority of the nation’s largest metropolitan areas posted fresh lows” earlier this year, but that in many areas prices appeared to be somewhat more stable. The creator of a widely-followed index of real estate values which that quote was based on felt there was a chance of a continuing decline in home prices. However, their index showed serious weakness in cities such as Atlanta, Chicago, Miami, Detroit, Las Vegas, Phoenix, and similar areas. They also noted that the Los Angeles area was down less than two percent from last year.

Another side of the coin may be seen in a recently-released “First Republic Prestige Home Index for Los Angeles.” It is an index based on a cross-section of homes valued at $1 million or more in the greater Los Angeles area. Its chart goes back to 1985, and reached a peak in the middle of 2007. Since that date the index had decreased every quarter until December 2010 when it showed its first uptick in more than three years, and it has remained fairly stable since then.

Looking at our own home town, 188 homes sold so far this year – an average of nearly 21 per month. As of Oct. 1, 2011 there were 29 homes in escrow, which is 25 percent lower than last year at this time. This, perhaps, is evidence of a market beginning to slow recently.

There are 85 active listings in Santa Monica as of Oct. 1. At what appears to be the current rate of sales, this equates to only a four-month level of inventory. Since most real estate economists agree that a market is roughly in balance between buyers and sellers when the inventory is about six months level, in theory Santa Monica is once again favoring sellers. It is interesting to observe that this compares with a seven-month level of inventory at this time last year.

It is notable that the steady sales volume is largely due to significantly lower priced home sales as compared with the previous year. For example, the median price for the first nine months in 2010 was $1,510,000, whereas for 2011 it was $1,393,000, which is down by eight percent. Also, we note that the average price per square foot is about four percent lower than it was in the first nine months of 2010.

Anecdotally, it is also interesting to note that multiple offers are still occurring frequently, and the average sales price as compared to the average list price is holding steady at 96 percent so far in 2011.

Michael Edlen of Coldwell Banker has been tracking and analyzing the local real estate market for years, and provides confidential counseling services to prospective buyers and sellers. More tips and information are available on MichaelEdlen.com. He can be reached at 310.230.7373 or Michael@MichaelEdlen.com.

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