Los Angeles, CA. June 11th, 2004 – For the last 12 months, homeowners and buyers have been wondering, "When will the frenzy stop?" The answer: "It has," says Anthony Marguleas of exclusive buyers' agency, Amalfi Estates. "But it doesn't mean that prices are necessarily going to go down significantly - it is still a seller's market." he adds.
"Supply and demand dictates the volatility of the property market. With a significant increase in the number of homes for sale in recent weeks, the heat in the city's property market is at last cooling off. Two months ago we reported the lowest ever number of homes for sale during the last 10 years that we have been tracking the figures, with the majority selling above the asking price and agents outnumbering homes for sale by a 7 to 1 ratio. This represented the peak, in terms of supply versus demand. Now, across the board, inventory levels are up by approximately 90% in the last four to six weeks alone."
This translates into a leveling off of property prices. Marguleas predicts that with more choice, buyers will start resisting the temptation to put in offers at any price. "Sellers will also have to be more realistic about the price they can achieve, and already some sellers and their listing agents are reducing prices as a result."
The main reasons for the dramatic increase in the numbers of homes for sale are: home-owners wanting to cash out and take their money at the top of the market, and take advantage of the $500,000 capital gains exclusion for married couples. Also, with interest rates starting to spike, homeowners are looking to sell now while there is a greater pool of buyers. When interest rates rise, fewer people will be able to afford to buy. Historically there are always more homes on the market in the spring, but Marguleas expects the inventory to continue to rise throughout the summer and for the next 12 months to two years.
"In Pacific Palisades, for example, the inventory has been as high as 250 homes for sale in the past. This fell to 46 in March, but has now increased to 86, so there is still a long way to go to reach normal inventory levels. I would expect the numbers to rise to 150 homes in the next 12 months. As a result, instead of 15-20 offers on each home, there will be five or so - still a healthy number, still a seller's market."
The number of days a property stays on the market has also increased. At the peak of activity, a home would be on the market for around 14 days. Marguleas reports that the time frame has already gone up substantially, up to 20-25 days in the last month alone. This time frame is expected to extend to 30-40 days, even as high as 50 days, which will make sellers more motivated and flexible on price, so that offers over the asking price will diminish. However, homes with exceptional features, such as incredible views, high-quality remodels, or great lots, can still command above-market prices.
Marguleas is confident that the market is still healthy. "Don't worry. It's not a downturn or a depreciation. The bubble is not about to burst. It's important to note that we've had an appreciating property market for eight straight years in Los Angeles - the longest in living memory for Los Angeles real estate, compared to the normal four to five year cycle. So it's going to take a while for the market to cool down, it won't happen overnight. Property prices will continue to increase for the next year or two, but more likely at 10 - 15%, not at the huge percentage increases we have seen in the last year."
Anthony Marguleas is the owner of Amalfi Estates, California's leading Exclusive Buyer's company, working solely on behalf of buyers to find them the home of their dreams at the best possible price, with no conflicts of interest. The company has been in existence for 10 years and has offices in Pasadena as well as Pacific Palisades, and is opening its third office in Toluca Lake.