The residential real estate market in Santa Monica is stable in terms of prices, but the volume of homes bought and sold is down – that seems to be the judgment of real estate professionals as 2006 draws to a close. Perceived cutbacks in real estate sales staff do not signal a market downturn, but represent normal cycles in residential brokerage firms, perhaps exacerbated by the current reduction in sales volume.
Boardwalk Realty, for example, closed its Santa Monica office at Wilshire Boulevard and 6th Street in June 2006; it had been open for seven years, and 65 agents worked out of that office at the time it closed. But Steve Aguilar, Boardwalk founder and president, says the company simply bought out its lease at that location and merged the Santa Monica office into the recently opened (August 2005) Brentwood office. “A couple of the agents went to our Marina del Rey office and a couple to our Playa Vista office; all the rest went to the Brentwood office.” The closure of the Santa Monica office does not indicate any desire to leave the Santa Monica market, he said.
At the same time, Aguilar said that while prices in Santa Monica have held steady and even had a moderate increase, the volume of housing units sold is definitely down, not just in Santa Monica, but perhaps 30 percent down in most of Southern California. He attributes this to interest rates that have been creeping up and the fact that “the market has had an almost 10-year run.” Notwithstanding that the closure of the Santa Monica office did not itself result in a reduction of agents, it is the case that Boardwalk “thinned out” its sales force two months ago for the second time this year, so that it is now down firm-wide by 20 of the 160 agents it started the year with. He calls this the normal attrition of non-producing agents who leave after six to 12 months in home sales, made tougher now because of the regional downturn in volume.
At Prudential California Realty, leading Santa Monica sales agent Kate Bransfield says that prices have “softened a little” but she “doesn’t expect more softening.” Buyers are taking longer to decide, she says, but selling a house in 60 days rather than 10 minutes is “a more normal market.”
Michael Edlen, MBA, real estate broker and consultant at Coldwell Banker, says that there is “very strong demand” for residential real estate in what he calls “destination communities” (“places that more people want to move to than move from”) such as Santa Monica, Brentwood and Pacific Palisades, but that “some of these areas are off 20 to 30 percent in sales unit volume, and some only 10 percent,” although sales prices are not significantly off. He characterizes current sales prices in such areas as a “flat landing” rather than the “bubble bursting” that had been predicted by others.
The closure of offices, Edlen says, is often the result of a larger number of offices within larger, well-established brokerage firms after mergers and acquisitions and then following “actions taken in response to changes in market conditions.” When sales volume goes down, firms combine offices. One reason for what Aguilar referred to as the “thinning” of sales forces is the “historically unprecedented explosion of real estate sales licenses issued in the last several years,” says Edlen. “Double the number of agents easily over the last six years.” Fifty percent of new agents leave within a year or two, he points out.
Edlen characterizes the currently more-or-less stable prices as a “breathing spell” that may last two to four years, and says that the diminished volume of turnovers is likely to be characteristic of such destination areas for another couple of years. Aguilar believes that the sales volume in markets like Santa Monica will continue to drop – 10 to 20 percent off 2006 levels – for the next two years, but that prices will hold as long as interest rates remain steady. Edlen goes out of his way to say that the “breathing spell” in price levels does not mean that it is not a good time to buy and to sell. And Bransfield points out that although interest rates have gone up, both buyers and sellers must realize that today’s rates “are still at historic low” levels.