The typically busy summer home buying season hit full stride during June with home and condo sales up sharply, resale prices rising, but at a more moderate pace, buyers out in force, eager to buy before interest rates rise, and a still-too-tight inventory preventing the San Fernando Valley market from overheating, the Southland Regional Association of Realtors reported on Thursday, July 23.
A total of 576 single-family homes changed owners during June, up 9.7 percent over a year ago. June marked the fourth consecutive month above the 500-sale benchmark with the first half of 2015 suggesting the year has a chance to beat 2009, which holds the post-recession high-water mark to date.
Realtors also closed escrow on 210 condominium sales, up 19.3 percent over a year ago and 28.8 percent ahead of this May. It was the first time in 16 months that condo sales came in above 200 closed escrows, making it the highest monthly tally since August 2013.
“The market is fantastic, filled with renewed energy,” said Gaye Rainey, president of the 9,200-member Southland Regional Association of Realtors. “Today’s buyers, sellers and Realtors make up a sophisticated, educated, realistic housing market where detailed, specific local knowledge equals power.
“When you know what you’re talking about,” Rainey said, “you come from a position of strength.”
Perhaps more than in any other preceding housing market, today’s buyers and sellers need guidance from a knowledgeable Realtor, she stressed.
“The opportunities are awesome, yet today’s transactions are not smooth,” Rainey said. “To succeed everyone needs to follow strict guidelines. They require a lot of due diligence, promptly attending to inspections, full disclosures and a willingness to negotiate. Most importantly, they need a strong guiding hand.”
Rainey and Jim Link, the Association’s chief executive officer, cautioned sellers not to overestimate their strength in today’s sellers’ market by pricing their home too high, which is the top mistake sellers are making.
“It’s definitely still a sellers’ market, so much so that sellers cannot underprice a property in this market,” Link said. “A home will sell at the value it’s worth. But an overpriced property will attract little interest, which may lead to a lost opportunity.”
Link also said the current lack of inventory, which triggers multiple offers on many properties, has resulted from a combination of factors: owners staying in their homes longer; younger households delaying a home purchase to retain flexibility to change jobs and locations swiftly; investors holding onto properties while they benefit from hikes in resale prices and rapidly rising rents; and financial constraints, such as a weak or flawed credit history or an inability to save for a down payment.
“The lack of inventory results from a lot factors,” Link said, “including a decision by some owners to refinance while rates are still low rather than try to trade to a bigger or even a smaller home, which could well lead to higher property taxes given today’s resale prices.”
The single-family median price of $562,000 was up 4.9 percent from a year ago June, but off 0.5 percent from this May, which was the highest since October 2007.
The condominium median price of $352,000 was up 8.3 percent over a year ago and 2.6 percent higher than this May. It was the highest monthly median since January 2008. After months of double-digit increases, home and condo prices are rising at a single-digit pace, restrained by limits on affordability.
Rainey noted that many buyers think they overpaid, only to try to “steal” concessions or force price reductions during escrow.
“In essence, they are using escrow to re-negotiate, asking for advantages they could not secure when there was a lineup of other buyers offering presenting similar offers,” she said. “Yet that strategy can backfire, resulting in a strong back-up offering winning the home.”
The 1,791 active listings reported at the end of June throughout the San Fernando Valley were down 0.9 percent from a year ago. At the current pace of sales that represents a 2.3-month supply, well short of the desired 6-month inventory. After rising for 19 consecutive months, from July 2013 through January 2014, heavy demand for homes has yielded a drop in the inventory every month since February.
Distressed sales bumped up slightly during June with foreclosure-related transactions and short sales—where lenders agree to a sale for less than the outstanding loan balance—accounting for 8.7 percent of all transactions. That was up from a 7.9 percent share in May.
Standard sales held a 90.2 percent share of the total market, REOs 2.7 percent, and short sales 6.0 percent, which was the highest in the last four months.
The Southland Regional Association of Realtors® is a local trade association with more than 9,100 members serving the San Fernando and Santa Clarita Valleys. SRAR is one of the largest local associations in the nation.