Is the Market Cooling Off?
I'm talking about this "cooling off" period that we're feeling. If you talk to the media or any other agents, they'll tell you this is leading up to the next real estate bubble. But, they are only looking at symptoms of a cause from 2007-2008 that is not the case this time around. They are looking at these symptoms, going into the real estate equivalent of WebMD, typing in "Longer Days on Market", and the first result that comes back is "Cancer". Obviously, that being the real estate bubble, that's not the case.
Stay off of the Real Estate WebMD!
Here's what's really going on: The list prices, in general, are "outrunning the market". Since 2012 during the recover, we've been seeing about a 10% increase each year in sales prices. But, this is not just basic appreciation. This is recovery. Things getting back to "business as usual". In some markets, with the prices taking off, we are seeing this incredible Seller's Market because there is not the same inventory of homes we saw during the bubble in 2004-2007.
We are seeing an increase in value, but it's the same amount of inventory across the board, and people are fighting over that. Since it's a Seller's Market, we are seeing the Asking Price really take off. This is what hurts metrics like Days on Market and Sales Price ratios. The further the Asking Price and Sales Prices separate, the longer days on market we see. It's as simple as that.
By this rationale, is it still a Seller's Market?
This happens primarily in luxury markets. In L.A., this is Beverly Hills, Santa Monica, South Bay beaches like Hermosa Beach, Redondo Beach, and Malibu. Now, on the East Side, it's a little bit more stable and reasonable. Areas like Hancock Park, Los Feliz, and Northeast L.A. like Silver Lake and Highland Park. The separation is much smaller so you have shorter Days on Market and higher Sales Price ratios. In fact, on the East Side, the Sales Price ratios are close to 100%, if not higher, because they know what the prices really are, and they are letting the "Market" dictate the price, not the Sellers.
The reason why these luxury markets are having this big separation is because they don't NEED to sell. They see these high prices and think, "If we can get this price great, if not, we'll take it off the market." This is what is affecting the numbers. These Sellers are affecting the numbers, the average Days on Market creeps up and agents are just assuming that the Bubble is coming up. Again, this is the WebMD results talking.
Here's the good news: In this separation of Sales price and List Price with longer days on market let's take advantage of the situation and create opportunities. This is for both Buyers and Sellers.
For Buyers, obviously soon the Sellers are going to start getting dismayed and worry that they need to get rid of their property before something happens, so it's a great opportunity to buy.
For Sellers, if you've been thinking about Selling, this is the time. There are great ways to market this thing, get the price right, get the timing right, get the marketing don't correctly and capitalize on this situation. You can be the exception to this "rule". Go on my website and read a few articles I wrote about this.
I call this concept the "Celebration Dip". This happened in Los Feliz in the Franklin Hills and they've taken right back off. Please feel free to reach out if you have any questions, or if you want to capitalize on this and buy your next home or sell yours the right way.