Existing home and condominium prices and sales increased significantly throughout the San Fernando Valley during April due to pent-up demand for housing and a critically low inventory, the Southland Regional Association of Realtors reported on Wednesday, May 29.
The median price of homes that closed escrow came in at $460,000, up 15.3 percent from a year ago and the highest figure since April 2008. Significantly, the increase from the record low for this cycle of $339,000, set in December 2011, was higher — 35.7 percent — than the remaining 29.8 percent difference with the record high of $655,000, which came in June 2007.
Likewise, the median price of condominiums that closed escrow during April was $277,000, up 20.4 percent from a year ago. The condo median was up 49.7 percent from the record low — $185,000, reported in May 2009 — yet 33.3 percent below the record high of $415,000, set in February 2006.
“No doubt prices continue to surge higher due to years of pent-up demand and today’s limited inventory,” said Sharon Barron, president of the Southland Regional Association of Realtors. “Yet, we have a faux reality driving the market, a false sense of security created by the extraordinarily low inventory and high number of multiple offers.
“Some buyers and sellers believe all housing issues have been resolved and prices will return to pre-recession levels” Barron said. “That seems unlikely, given today’s tight loan underwriting rules and the ongoing presence of owners who still owe more than their home’s current resale value.”
Jim Link, the Association’s chief executive officer, noted that the lack and inventory — down 35.6 percent from a year ago, to 1,117 listings and a mere 1.5-month supply — along with the presence of “underwater” owners go hand-in-hand.
“The pent-up demand for housing combined with the low inventory have spiked activity,” Link said. “The residential resale market will stay very busy, yet the market will stabilize at a point where it’s not such a frenzy once short sales diminish further and rising resale prices lift more owners into a positive equity position.”
Link said each tick up in prices gives thousands more owners additional options and most likely will yield additional inventory as owners say: “’Okay, I’m no longer underwater, now I can look at what I can do,’” sellers will say. “’Now I can take advantage of low interest rates.’”
At that point, the new normal will appear, Link and Barron agreed.
A total of 580 single-family homes changed owners during April, up 9.4 percent from a year ago and 12.4 percent higher than this March. Condominium sales of 192 units came in 16.4 percent ahead of April 2012, yet down 2.5 percent from this March. Home and condo sales were up dramatically from their record lows — 73.4 percent and 82.9 percent, respectively —yet are unlikely anytime soon to come close to their record-high sales of 1,321 and 524, respectively.
The tight inventory also is a result of a major improvement in the market: the steep drop off in sales of distressed properties. Of the total 752 closed escrows during April, 69.3 percent were standard sales, 10.2 percent foreclosures, and 19.4 percent short payoffs. Not long ago, distressed sales accounted for 50 percent or more of closed escrows.
Barron urged owners who are considering selling to get their home on the market quickly, especially if they want a low interest rate on the purchase of a replacement residence.
“Buyers are out there and they’re willing to pay list price or higher,” she said. “Sellers need to be realistic about their list price, a number that will be easier to determine if they work with a trusted Realtor, which is really important.”
While the Internet is a powerful tool for buyers and sellers alike, Barron cautioned against over-reliance on use of public websites when settling on a price.
“Some websites do not update frequently, some do not have all the statistics, or all of the comparable details, and, frankly, some websites simply are not credible,” Barron said.
She said the best service is assured by working with a trusted Realtor who abides by the industry “Code of Ethics,” while the best price is guaranteed by listing a property for sale on a Multiple Listing Service.
The Southland Regional Association of Realtors® is a local trade association with more than 9,000 members serving the San Fernando and Santa Clarita Valleys. SRAR is one of the largest local associations in the nation.
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