The real estate market in the Westside has prompted recent questions. Below are my answers.
Was the good news we noted in May and June a “blip”, as some had thought, or was it the actual beginning of a new trend?
1. Even though the number of sales so far this year is 20-25% lower than the first half of 2008, sales activity in the Westside has actually increased since the Spring. There is evidence that it is rapidly approaching last year’s pace. For example, there were 34 new escrows in the Palisades in May and 42 new escrows opened in June, which was identical to the number of new escrows in June 2008!
2. At the current rate of escrows closing on average each month, relative to the inventory of homes now for sale here, there is about a 12-month level of homes available. This is significantly lower than the 15-16 month level we recently experienced.
Which is the better selling strategy in today’s market? (1) Setting a price that is 5-10% above what one hopes the market might yield, with the idea of negotiating with the buyer from their initial bid, or (2), pricing the property just at the level where the market indicates, with the hope that the prospective buyer will offer more than he or she otherwise would have, thus ending up paying close to the asking price?
1. The evidence seems clear that the sellers who experience the best outcome are the ones who are courageous enough to set the price just about exactly where the current market value is! Pricing it right to begin with results in a quicker sale and generally at higher levels. For example, an analysis of the 46 Palisades escrows open as of July 15 shows an interesting pattern. The median time on market for these listings was 83 days. One-hundred percent of those on the market for longer than 83 days had price adjustments before getting into escrow, whereas only twenty-five percent of those on the market for less than 83 days had price adjustments.
2. Another example is that in four of the five recent sales I had, the sellers received multiple offers when the price positioning was quite close to what the buyers perceived as fair market value. One even sold for more than where the seller decided to set his initial asking price.
3. The market continues to slowly adjust to lower levels. It might take many more months before supply and demand get back into more balance. Thus pricing higher than the last six-months average levels may prove to be costly in the long run. For example, if the market trends down at only about one-half of a percent per month, which would be less than half the rate it had fallen over the last year or so, that could result in values being lower by three to five percent by the end of 2009. Thus the more appropriate level to set the price would be about three percent below the average comparable sales for the previous several months.
Michael Edlen, an agent with Coldwell Banker in Pacific Palisades, can be reached at 310.230-7378 or Michael@MichaelEdlen.com.