Contradictory Patterns at Work

By MICHAEL EDLEN Special to the Palisadian-Post As we move into the heart of summer and with the stock market having some problems, it may be of interest to look at what is going on in the Pacific Palisades real estate market right now. A ‘snapshot’ of July 2007 compared with July 2006 shows a contradictory pattern, and it fascinates many people who try to understand what is really going on today. July 2006 July 2007 % Change Number Sold 27 21 22% lower Number in Escrow 42 36 14% lower Median Sale Price $2,250,000 $2,150,000 4% lower Number Active as of 8/1/07 98 81 17% lower Although local sales were about five percent higher for the first half of the year (as compared to a year ago), they dropped by 22 percent in July. The market’s transition is also evidenced by the 14 percent fewer homes entering escrow right now. The odd observation is that sales prices were off only four percent in July, which is the same as the first half of the year. Economists have long expected all the recent bad news about the nationwide housing market. Many areas of California have even experienced large increases in inventory levels of unsold homes on the market, accompanied by increasingly lower average home prices. So why is the Palisades again outperforming so many other areas by having such a small average sale price decrease? Perhaps it is mostly due to the fact that substantially fewer people here have been putting their homes up for sale, resulting in 17 percent fewer homes available than on August 1, 2006. And why are fewer homes being put up for sale this year? One frequent answer I hear is the question, ‘But where would I move to?’ Even though many homeowners could benefit from a tax point of view, and could enjoy the use of a substantial freeing up of large equity positions in their homes, still they cannot imagine where else they might enjoy living. Even more longtime owners hesitate to sell now because of the taxes it would cost, even after considering the large tax exemption available and reduced long-term capital gains taxes. A summer seasonal slowdown is typical in Palisades home sales. However, a review of the 2006 vs. 2007 comparisons indicates that this summer may be the turning point here. If so, prices may still slip at about a four percent annual rate until some new equilibrium is reached. Michael Edlen provides real estate counseling services to prospective buyers and sellers through his affiliation with Coldwell Banker. More information is available on his Web site (MichaelEdlen.com) or by calling (310) 230-7373.