Q: Michael, is it our imagination, or is the housing market beginning to move up again?
A: Yes, with some caveats. Nationwide housing markets are definitely in better shape than they had been for 3-4 years. Locally, the Westside is no exception. With a substantially higher sales volume so far this year as compared with 2011, and a shorter time on the market in general, Westside prices are somewhat higher now than they were last year. In Brentwood, the average price per square foot is nearly 3% higher than last year, although the median price level is about 3% lower.
Q: Is the current trend sustainable, do you think? Anything we should be worried about?
A: Yes, I think we have begun a gradual recovery, and in some areas rather dramatically. Although Brentwood has so far not experienced the 8-10% price appreciation that other Westside areas have enjoyed this year, I think the underlying demand is strong enough to assure an upward trend for a long while. Technically, Brentwood has become a “seller’s market.†This is because at the current rate of home sales, there is under a 5-month inventory of Brentwood homes available. It is generally recognized that real estate markets are roughly in balance between buyers and sellers when the level of inventory is approximately 6 months. That being said, when interest rates increase as they no doubt will at some point in the future, the upward trend may level out or perhaps reverse again. Of course, any major international event or natural catastrophe could more abruptly impact the housing market. An additional factor that so far has been relatively small in impact on our local market has to do with an influx of foreign money being used primarily for investment purposes. While some recent purchases have been made by people from such countries as Canada, Russia, and France, the long-anticipated influx of funds from China has begun to be more significant.
Q: It seems like everyone wants to see a return to fast growth in home prices. But, isn’t that asking for trouble? A quick run-up in prices could indicate a return to another “boom-bust†cycle – fun while things are going up, but very painful when the downturn arrives. What do you think?
A: Buyers certainly do not want to see home prices increase rapidly, and many are finding the obtaining of financing to be challenging already. Yes, if prices escalate at an annual rate of 10% or more again soon, it could lead to another significant downward adjustment unless our economy somehow provides a very substantial increase in actual employment levels. Painful downturns will be less likely if the price appreciation rate is more gradual, and it appears that the current Brentwood market is now experiencing that type of movement.
Q: Any advice for buyers? Sellers?
A: I highly recommend that buyers be mentally, emotionally and financially prepared to be decisive when they find a home that is a close match to their criteria. Interest rates are at near-historic lows, and the real “cost†for most buyers is their monthly payment. When interest rates increase, and home prices are even marginally higher, buyers may discover they have waited too long to be able to purchase a home that satisfies most of their criteria. Likewise, I advise sellers to be mentally and emotionally prepared as well as realistic in their expectations. I encourage them to stay informed about current market conditions and local activities, and strongly recommend that they engage the services of a seasoned expert to help guide them in the home preparation and active marketing processes.
