By JOHN HARLOW | Editor-in-Chief
House prices in the usually rock-solid Pacific Palisades property market have fallen for the first time in five years.
The latest data for the first seven months of 2016 suggest the average price of a home depreciated by 6 percent year on year, compared to a 15 percent rise in 2014 and a nine percent rise last year.
More than 60 percent of homes for sale a year ago had multiple offers, said Anthony Marguleas of Amalfi Estates, but now it’s closer to 30 percent. He calls this a reality check for many.
“It will most concern developers selling new homes, which make up 20 percent of active inventory compared to five percent a while ago. They have to drop their prices because of their financial commitments,” said Marguleas.
“Homeowners thinking of selling should sell now to preserve their equity, but if you don’t want to or don’t have to, then you could sit out this next cycle.”
Marguleas said the Palisades is similar to other communities on the Westside, which could face soft prices but the long-term health of the market remains very solid.
“It is cyclic: We had an 11-year run of house price rises between 1997 and 2008, and then the recession and then, since 2011, a strong recovery. But it could not go on for ever.”
The broker said that, whilst he did not have a crystal ball, he predicted the biggest fallout could be felt in the higher-end market.
“A year ago or so there was only a couple of homes listed at 14 million dollars or more. Now there are 9, too many for the number of buyers,” he said.
Yet the shortage of such homes makes it tough for buyers to compare underlying values so there could be “big swings” in the mansion market.
Those with smaller homes, in Marquez Knolls and the Highlands, with values between $1.7 and $2.2 million that Realtors might call the Palisadian “low end” are likely to prove resilient with many first-time buyers still looking in those neighborhoods.
The real pain may be felt amongst developers who have built “spec” rather than customized homes in areas such as the Alphabet Streets, which have been pushing the price envelope in recent months. They may find fewer buyers this year than last and the deal may take longer to close.
But, emphasized Marguleus, the long-term outlook for the local property market remains strong and healthy.
“This is an significant adjustment, but we shall adjust.”
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