Is The Bottom Coming Soon?

Statistics always trail what is actually happening in a marketplace, and thus it is difficult to predict market tops or bottoms. However, there have been many recent reports of increasing sales in various areas of the country, gradual stabilizing of price levels in the lower-priced sections of many states, and other potentially beneficial responses to the government programs and loan industry actions.

A review of local price trends over the past year between decreasing home values and the increase in the unsold homes inventory shows a clear relationship. Since September 2008, the steady increase in numbers of homes available for sale has accelerated the general decline in market values. Comparing the price per square foot of properties sold may be a more accurate indicator of price movement than using the average or median price level differences. Depending on specific time periods and individual Palisades neighborhoods, prices are lower by 25-30% from their highs of 2007.

For homes for sale in different price ranges, there is a significant difference in the rate of sales compared with inventory levels. For example, while it would take 11 months to sell all the homes now listed in Pacific Palisades below $4 million, it would take about two years to sell all of the homes for sale over $4 million. As of May 11, there are a total of 30 escrows open in the Palisades, only three of which are above $4 million.

A recent sign of improvement benefitting sellers is that for the second month in a row we have seen an increase in the number of Palisades homes in escrow, with more contracts pending than there have been since September 2008. This in turn has resulted in a slight decrease in the growth of inventory and diminishing of sale prices in the Palisades. While obviously this is another way of saying the news is not as bad as it was in the preceding several months, it may indicate a possible shift in the market.


What was thought to be a leading indicator of a turn in the market in September 2008 was the ratio of escrows opened as compared to new listings coming on the market. This ratio had generally ranged between 90-100% for the past six years, before dipping below 50% in September. After hitting a low of 22 and 24% between October and January, the ratio has been between 40-68% for the past three months. This may be the first sign of the local market turning towards more balance between sellers and buyers. The anecdotal observation of greater number of showings, larger turnouts at open houses and more offers written on well-priced properties is a trend that has continued into the middle of May. Multiple offers have continued to occur and buyers’ perception of good market value has steadily become more apparent month-by-month.