The most common question I am asked is, “How is the real estate market?” My thoughts on the market are as much a feeling as a statistical analysis. I’m of the opinion that a combination of an emotional sensitivity (how buyers and sellers are reacting) and the statistics is the only way to yield a truly tacit understanding of what is happening.
My knowledge and experience is focused on the Santa Monica and Brentwood real estate markets. While there are charts and graphs that may contradict my feelings on the subject, I can confidently tell you that the real estate market in Santa Monica and Brentwood is good.
Even in the midst of the economic downturn, the median condo sale price in Los Angeles is $415,000, down about $15,000 since 2010. The median sales price YTD in Santa Monica is $660,000. North of Wilshire condos are averaging about $550 per square foot with an average sales price of about $790,000 (excluding Ocean Avenue condos). These numbers are slightly down from 2010 when the average sales price was $815,000 and the price per square foot was $560.
Houses in Santa Monica had a median sales price of $1,550,000 in 2010. That value has dropped about $100,000 or 15 percent this year to $1,450,000. However, one should note that a greater number of lower-end homes sold this year. I would say the drop in values is closer to 5 percent in Santa Monica single-family homes.
From 2007-09 there was a more dramatic drop in values, approximately 15 to 30 percent depending on the property with an average 20 percent drop. So, we hope this means prices are beginning to stabilize. There are two other notable developments in the market that point towards a positive trend. Rental rates are increasing and are up about 5 percent over what they were last year, with a continued increase expected. This places the cost of owning a condo, very much in line with renting; even before the tax advantage one can achieve with mortgage interest and property tax deductions.
If you consider the average days on market for Santa Monica houses sold year to date is 50 and the average escrow period is 45 days, we have about a five month supply of inventory of condos and single family homes in Santa Monica: 247 homes on the market and 71 in escrow.
In Brentwood we have about a four-month supply: 179 homes on the market and 68 in escrow. While not an exact science, for example one should consider that some of these homes will never sell and others will fall out of agreement, these are the types of numbers generally used to describe a healthy real estate market.
Out of the 27 buyers and sellers I have represented so far this year, about half of the properties were in multiple offers. In the heyday of the market, 2003-06, multiple offers would achieve extraordinary leaps in value. These days, half a dozen offers may yield no more than the highest offer being slightly under the asking price. Even so, a well-priced property with desirable qualities, about a third of the marketplace, will sell and have its choice of several eager suitors.
Sure, there are a plethora of insecure buyers backing out of escrows for no good reason. However, on a quality property, sincere and confident buyers have always been there to put it back into escrow and see it through closing. Today, it takes more clarity of purpose than it may have in previous markets to move forward as a buyer. It’s almost as if there is a radio station on during the entire transaction going: “don’t buy it,” “the world is going to end,” or “you are paying too much!”
In exchange for a courageous heart, the real estate market is bestowing gifts of fantastic real estate buys and interest rates under 4 percent (15-year fixed term). At the market’s peak, a 7,500-square-foot lot north of Montana Avenue in Santa Monica, with a tear down or major fixer house on it, was selling for about $2.3 million. A very workable house on a 7,600-square-foot lot on 15th Street in 90402 recently went into escrow somewhere in the $1.7 million range. Keeping in mind that North of Montana is one of the most expensive neighborhoods in all of Los Angeles, the buyer got a good deal.
It’s a good market for buyers. It’s a better market than most people think it is. If you are thinking about making a purchase, the next couple of years will continue to yield sound buys. Wetside Los Angeles real estate is the gold standard in real property, it would be wise not to discount it and foolish to miss out on this opportunity.
Simon Salloom is a realtor partner at Partners Trust Real Estate Brokerage in Brentwood. He lives in Santa Monica with his wife and two sons.