Where is the residential housing market headed in the South Bay and Palos Verdes?
The Real Estate market in Southern California has had quite a run, but where does it go next? The Dow Jones Case/ Schiller index has shown that while housing prices are still on the rise, the increases are slowing. There are still some local exceptions to this indicator, but we are also seeing the a average days it takes to sell a home increase as well. One cause of this is likely linked to the additional inventory added this summer. Many would be sellers have waited out the drop in prices and are now finally feeling comfortable listing their homes – in my market alone I know of a half a dozen sellers in this boat. Meanwhile the number of buyers simply has not kept pace with the rising supply of homes. While these factors indicate a return to a more balanced market as compared to the seller’s market we witnessed during the last 18 months (which ended mid-summer in most LA markets), disciplined buyers may be able to turn up some discounted homes.
On the broader economic front, the dollar continues to strengthen; which, if this continues, could lead to inflation, which ultimately may be the signal the Federal Reserve needs to give the green light to raising rates. Considering the real estate market has had a pretty nice run over the last few years, it makes historical sense that we are due for some leveling on the charts.
Another factor to consider is that while many have benefited from the strong market, there are still plenty of would-be buyers that have been on the sidelines recovering from the market collapse from 2009-11. Some may never return to home ownership, but with a strengthening US economy, we may also see broader based prosperity and increased housing demand. With the latter, we will likely see an initial challenge to prices as a result of rising interest rates. However, as home buyers become more comfortable with “normal” interest rates, the increased demand should likely result in a more modest and sustainable price growth in the entire housing market. What no one knows is the net effect of Toyota Motors leaving Torrance and what that could do to the micro housing market in the South Bay and Palos Verdes area. What we do know, is with a solid plan and a long time horizon, history has proven that an investment in Real Estate can be a great way to grow your hard earned dollars – you just have to time it right.
