As we began 2014, the number of homes available for sale in Santa Monica was as low as it has been in many years. There are only 33 homes on the market, which is a lower level of supply than as at the beginning of 2013.
Due to the high demand for Santa Monica houses especially under $2 million, the median $3,250,000 list price is almost unbelievably 50 percent higher than it was 12 months ago.
A number of factors have contributed to this continuing lower supply, and the net result has been a remarkably enduring “seller’s market.”
In 2013, we experienced a reduced number of sales as compared with 2012, with median sales prices increasing by 18 percent.
With just 33 homes on the market at the start of this year, it would only take one and a half months to sell all the homes available at the current rate. Last year at this time, there was approximately a 2.5-month level of inventory.
When the inventory level dips below six months, it is generally considered to be a “seller’s market.”
As of January 1, 2014, sellers have the most favorable market environment that we’ve had in decades.
With home sales continuing to exceed new inventory in 2013, it is no surprise that prices have increased on average by 18 percent, and also by 18 percent per square foot. 2013 was clearly another year of substantial market changes, following the 2009-2011period of major price correction.
There are a few reasons for inventory being so low at this time. One is that some owners who have been leasing their home rather than selling in the down market have not yet made them available for purchase. Another factor is that the level of purchasing by investors has continued to increase through 2013, putting pressure on the market in many Santa Monica and other Westside neighborhoods.
Additionally, banks own 25 Santa Monica homes, which have not yet been listed for sale. Also, 24 local homes are either in pre-foreclosure stages or already have had bank auction dates scheduled.
Looking forward, buyers are likely to experience a continuing high level of frustration in their effort to identify and succeed in purchasing a home. Although interest rates are still near low levels, which has made home purchasing much more affordable, many prospective buyers have often found themselves being out-bid by either all-cash buyers or by investors/developers seeking more business opportunities.
Some good news for buyers is that investors are beginning to reduce their purchases of financially distressed homes as their profit margin narrows and inventory of local distressed properties has declined. Of course it may take several months before enough homes are listed for sale in the more affordable price ranges, but the increase in home prices will encourage more homeowners to put their homes up for sale.
As could be expected, local sellers are likely to continue enjoying a very solid market in their favor for at least several months. Until interest rates and/or average price levels increase more significantly, it is reasonable to suppose that the current strength of the buyer pool will be great enough to offset the seasonal increase in new listings that is about to begin.
Of course, each neighborhood has its own price dynamics. Also, there are varying degrees of market balance between sellers and buyers at different price ranges. Therefore, owners who may be considering selling property in 2014 would do well to meet with an experienced local real estate agent to assess where their particular property fits into this picture before deciding on timing and price positioning.
In 2013 Michael Edlen was the leading Santa Monica-Palisades-Brentwood agent. He provides real estate counseling services to prospective buyers and sellers. More insight and information are available at MichaelEdlen.com. He can be reached at 310.230.7373 or Michael@MichaelEdlen.com.