OK, so maybe a Big Day for the Conejo is a bit of an exaggeration. Still, it’s worth noting that today our total number of units stands at 497. The reason this is significant, is that with 3 more available units, we’ll mark the first time in two years that we are at 500 total properties available for sale, leaving little doubt that we are no longer in a seller’s market. Taken with the monthly sales numbers we have now, we are creeping above 3 months inventory. In other words if no new homes came on the market it would take us just over 3 months to sell out. The National Association of Realtors states that a balanced market is 6 months of inventory. I maintain that California has to be in a state of perpetual shortage or else why would a home in Malibu sell for any more than one in Kansas? Obviously there has to be a shortage of Malibu homes for sellers to command such a high price like Malibu enjoys. For me that magic number is 3 months inventory, and that’s what we have. So by my rule, we are now in a balanced market; one that neither favors buyers nor sellers. This of course is a good thing… usually. Let me explain.
Everyone agrees that it was in no one’s best interest for us to have a repeat of last year’s chaos in housing. A 20%+ jump in prices in 6 months is crazy. Repeat that and we’re no longer crazy but in a bubble and when bubbles burst, they leave a big mess for everyone to clean up.
You would think therefore, that everyone should be happy with the current market. Not so. There is evidence that certain neighborhoods are experiencing record breaking prices; prices that exceed the last bubble in 2006-7. I recently saw a home sell for a price similar to an offer I wrote for the same model two doors up in 2006. However, I am also seeing homes sit on the market getting very little traffic. Why is that? It’s difficult to say for sure, but newer homes seem to be selling best, that and ones that have been completely redone. Flipped homes are moving well and at high prices, so too the remodeled beauty or the rare entry level home. Conversely, homes that require some work are just sitting and sitting. I believe this is due in part to the fact that buyers today don’t want to do any work. They want finished and upgraded. I suspect this has as much to do with our crazy lives as it does to the fact prices rose a lot last year and don’t forget that remodeling takes cash and can’t easily be wrapped into the loan. When prices rise like they did, it puts homes out of reach of many would-be buyers. A buyer I’m working with for example told me he missed the jump in values and super low interest rates so the motivation to buy, just isn’t there. If the dream home were to come up, he’d write, but he suspects that a home with that criteria would be beyond his top end price point; the market has moved that much.
OK, so buyers aren’t motivated and aren’t happy with the selection at current asking prices. Even with more inventory coming on, they just aren’t bending over backwards to buy anymore. The sellers aren’t happy either though which is interesting. I am seeing higher and higher asking prices and that in part is why homes are sitting. The higher asking reflects the changed market and the entrance of new sellers into the market. They come loaded with an inflated value of what their home is worth. The fact that home prices went up 20% last year is great, but they want even more this year. This is the mentality. The thinking seems to be, “Why should I sell if I can’t get my price, I’ve waited this long?” There’s an old adage in negotiations that states a good transaction is either a win-win or a lose-lose. A bad one is when you have a win-lose or lose-win. I would characterize the current state of home market as a standoff between buyer and seller. Sort of like a lose-lose in negotiating, keeping in mind that a lose-lose is still a good deal for all parties since neither is taking advantage of the other. Maybe that’s why neither side is really happy with the current state of the market, neither is winning. Go figure. One thing is for sure, the market never stays static for long so expect something to change; one side or the other is eventually going to prevail.
So here we are; we’re in the spring selling season; inventory is rising as it should yet the market feels a little muddled. Are prices going to drop? Maybe, they certainly aren’t rising in most neighborhoods, so maybe they will give a little of the big 2013 run up back. On Wall Street they call this a correction and a correction is always viewed as both healthy and a good opportunity if you are a buyer. Will they crash? Doubtful but we could see a little correction this summer and if you’re a seller, take note and make the adjustment now before everyone else does. If you’re a buyer, now’s not the time to relax. Have your check book ready because that home you wanted might be just around the corner and at a slightly better price than you may have thought.