What happens in a real estate market where the demand greatly exceeds the supply, which is currently the case in Pacific Palisades? How does the lack of sufficient inventory affect the 300 real estate agents working this area? And what does it do to housing prices? Could it be we are in for a market “crash,” but in a way no one imagined? Just how low can the inventory go? What if there were no homes for sale in the Palisades? “Impossible!” was the overwhelming response of half-a-dozen local realtors contacted by the Palisadian-Post. However, they also said they never imagined inventory being as low as it is now. Currently, there are approximately 50 homes on the market in the Palisades, compared to 82 a year ago. Median price: $2.5 million. Over that price, “there is a five-to-six month supply of houses,” said Coldwell Banker’s Michael Edlen, who has been keeping statistics on the Palisades housing market since 1986. However, under that price, “we have less than a month of inventory at the current rate of sales. So we’re likely to continue to see multiple offers, especially under $2 million.” With housing inventory at a 20-year low, the Palisades real estate market has changed considerably in recent months. Dozens of buyers, many of whom are moving up and are able to pay all cash, find themselves participating in bidding wars in which houses are simply sold to the highest bidder. Traditional real estate evaluation tools, such as appraisals, are becoming skewed. So what does happen in this kind of auction-like frenzy if a property doesn’t appraise? “This market is moving so fast, appraisals have become as much an art as a science just to keep up with what’s going on out there, especially in multiple-offer situations,” Edlen said. “It is pretty hard for a property not to appraise if there are four buyers willing to pay over the asking price.” Now, if houses do fall out of escrow for any number of reasons, it only seems to make them more attractive to the next buyer, who may have already put in a backup offer. What does all this do to housing prices? “They’re just going to keep going up, as long as the inventory is low,” said Scott Gibson, who lives in the Highlands and is president of Coldwell Banker in Greater Los Angeles. “Part of the reason inventory is so low is because homeowners, many of whom have nowhere to go, are choosing to refinance and remodel rather than move. All this remodeling is a good thing because it adds value to the overall housing stock in the community.” Gibson, who recently told the Post that within five years “you won’t be able to buy a property under a million on the Westside,” also sees this market “as one of those rare times when it’s good for both buyers and sellers. Sellers because they can get top dollar and buyers because of continuing low interest rates. Owning property is still one of the best investments you can make.” Beverly Gold, who is also with Coldwell Banker and has lived in the Palisades since 1952, agrees. Having been involved in the sale of almost 90 percent of the homes in The Summit housing project in the Highlands, Gold said she has seen the properties she sold in 1997 “double in value” since then. She currently has five listings in the Palisades, three of which are in escrow. “Last week my $2.8-million listing in the Highlands sold in one day and my $2.9-million listing the week before sold in three days,” she said. How did Gold get so many coveted listings? She said she is in the enviable position of having created “an annuity for myself, having originally sold so many homes in The Summit. My clients are very loyal and call me when they are ready to move up or sell. I am very fortunate.” Anthony Marguleas, of A.M. Realty on Sunset, who deals exclusively with buyers, thinks that the decrease in inventory “will finally weed out a lot of agents in the area. Only the best ones will survive.” Randy Freeman agrees. “It will be the same as it has always been, with 20 percent of the agents around here doing the bulk of the business.” Freeman, an agent with Prudential John Aaroe who has worked in the Palisades for the last 13 years, feels that this market is preferable to the market a decade ago “when there was something like 278 houses on the market and no buyers!” Joan McGoohan, who manages DBL Realtors on Sunset, also prefers this frenzied market to the early 90’s real estate slump. “I remember when you couldn’t give away houses in the Huntington!” which is where she currently lives. “That’s when people were walking away from their homes because they were paying more for their house than it was worth. It was a dreadful time, for everyone. At least now, if people can’t find what they want, they can stay where they are. That’s primarily why there is such a lack of inventory.” As for the growing trend of homeowners being solicited directly by prospective buyers, McGoohan said that while she does not condone the practice, “I don’t blame them. How else are buyers going to find what they want?” John Closson, who lives here and is western regional manager for Prudential John Aaroe, believes that Palisadians will continue “to take advantage of the opportunity to trade up at a lower cost,” although the “fear of locating a suitable replacement property can be paralyzing.”
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