Real Estate Market Update- February 2011

As we begin a new month, and take a look at the palisades market so far this year, a few interesting observations can be made.

There have been 238 local homes sold in the last 12 months, which averages 20 per month. As of February 28, 2011 there are 47 homes in escrow, which appears to be consistent with the last 12-month rate of sales. There are 103 active listings as of February 28. At what appears to be the current rate of sales, this equates to slightly more than 5-month level of inventory.

Since most real estate economists agree that a market is roughly in balance between buyers and sellers when the inventory is about 6 months level, in theory the Palisades is once again slightly favoring sellers. It is far too soon to guess if this is a trend beginning much sooner than expected, though it is interesting to observe.

It is also interesting to note that the median price of homes that have closed escrow this year is below $1.6 million, as compared to $2 million for the first two months last year.

Rising Treasury Rates Trigger Higher Mortgage Rates

The US Treasury bond market faces a big test this week, with market interest
rates on long-term government securities now at their highest level since
last spring. Last week set off alarms in the bond market because Treasury
yields broke out of the trading range they'd been in since mid- December.
The 10- year T-note yield jumped to 3.64% on Friday, up from 3.32% a week
earlier and the highest since May. The steep rebound in bond yields since
October has in large part reflected the economy's surprising strength. The
rising Treasury rates matter for more than just that market, they also
influence the mortgage rates. Interest rates are rising as some investors
bet that we're getting close to the point where the Federal Reserve will
begin to tighten credit.

As reported in the Los Angeles Times: Tom Petruno, February 7, 2011

Real Estate Market Update- January 2011

As the first month of 2011 has passed, and although there have not been enough sales to draw any conclusions from, the following is the initial picture:

The number of sales (16) in January was 38% lower than last year at this time, and the median sale prices were 33% lower. Prices per square foot were approximately 12% lower during this first month of 2011. There is a 7% larger inventory of homes available this year. Some indications that the market may be leveling out are that the average days on market is 37% shorter than it was at this time last year (now 86 days). One tangible sign that the market may be approaching its bottoming out level is that at the current rate of sales, there is a 6.5 month inventory of homes available in the Palisades. It has generally been agreed that when the number of months of inventory is above 7 months it has become a buyers market. Where as below 6 months it tends to benefit the sellers.

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“Wait-and-See” Buyers May Lose Out

By Michael Edlen, Real Estate Consultant

Published in Palisadian-Post and Santa Monica Mirror

Real estate agents have seen increasing numbers of prospective buyers repeating what has become a familiar pattern.  In the current slower market, many buyers hesitate to make a purchase decision even when their search criteria have almost all been met by a property they have viewed. However, many prospective buyers may look back with regret if they are not prepared to make offers when a home meets their needs.

Of course this reluctance has served well from one point of view. Clearly prices have been in a downward trend for quite a while even in relatively stronger market areas such as the Westside of Los Angeles. 


However, it has long been noticed in real estate as well as other financial arenas that no one “rings a bell” at the bottom of the market. In some neighborhoods the bottom may already be occurring, despite the overall general news and market statistics. In fact, it is not uncommon for there to be multiple offers in some of the more desirable areas when a home is priced very competitively. In recent months we have had multiple offers on two of our listings north of Montana, both of them sold for more than the list price.

Another example occurred in the Palisades with a new home that had been on the market for several months. The seller finally decided to adjust the asking price by approximately 10% with the intent to make it extremely attractive to buyers so that at least one of the prospective buyers with a “wait-and-see” attitude might be incentivized to present an offer. Within a few days three buyers wrote offers, and within the week it was sold at a higher price than the reduced price point. One of the unsuccessful buyers was very sorry they lost out because they waited too long to decide. This put them in the middle of a bidding war that they lost in the end. During the two-week contingency period they even offered to increase the price.

Many buyers seem to feel that nothing is well-priced today, and eventually can be purchased for lower prices. While this may be true of some listings, those which are well-priced to begin with are sold rather quickly even in this slower market. Moreover, decisive buyers usually do not regret negotiating the best terms on purchasing a home that meets most of their criteria. A client of ours recently thanked us for encouraging them to move forward rather than continuing on the sidelines in the hopes that an even better opportunity might show up. They also benefited from their timely decision because of the historically low cost loans still available.

No one has an infallible crystal ball to know when the best timing for a purchase will be. However, unless someone intends on selling within a few years, odds are that they will look back and feel good about having bought sooner rather than later.

For more articles about the home buying and selling process and current real estate trends see MichaelEdlen.com

Palisades Housing Market Update 10/20/10

As of today there are 149 homes for sale in the general Palisades market area, which is slightly lower then last year at the same time.  At the current rate of sales per month, there is now approximately seven-month inventory of homes for sale, which reflects the market which is almost in balance between buyers and sellers.

There are 38 homes in escrow, with a median list price of $2,200,000 and there have been approx 200 sales so far this year with a median price of $1,950,000. (Which is about 5% lower then last year at this time)

There have been several cases of multiple offers in the past month.  For example, about seven of the current escrows involve multiple offers! (Which is close to 20% of those in escrow)

The Palisades’ areas with the greatest number of sales so far this year are the Highlands, El Medio to Marquez area, and the Alphabet Streets.  Prices have ranged this year so far from $635,000 to $26,000,000!

The above summary verifies that the Pacific Palisades remains robust in homes sales, and decidedly is a market that could be moving up at any time in the near future. 

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For Home Buyers – Opportunity Knocking Louder

As we enter a new decade, buyers who have hesitated are increasingly discovering that there are some very compelling reasons to make the move now. After an initial shift from a “seller’s market” to a “buyer’s market” at the end of 2007, home sale prices weakened considerably in 2008. Single-family home sale prices in the Palisades have dropped another 17-20% in 2009, although at a much slower rate in the fourth quarter.

The current housing market is a puzzle with many moving parts. There are periods when the moving parts appear to be ambiguous. Although buyers have fewer homes to select from at the start of 2010 than we have seen for more than a year, sellers whose homes have not sold for many months are often willing to accept prices lower than most people would have expected. As long as interest rates remain relatively low, buyers are likely to continue finding that the market is in their favor and be in a position to purchase homes that even six months ago would not have been affordable. Of course, buyers need to have sufficient liquid assets and income, a secure job, and good credit scores in order to qualify for financing.

The total number of local homes sold in 2009 was almost identical to the numbers in 2008. However, in December 2009 there were 18 sales as compared with only 9 in December 2008. This surprisingly large increase has obviously contributed to there being an inventory of 19% fewer homes available.

Areas such as the Palisades have felt very little impact due to foreclosure sales. The overall increase in such types of sales has had some negative effect, however, even if only on a psychological level. If the level of sales continues to be higher in 2010 than it has been, buyers may absorb the housing inventory even if the inventory is somewhat increased by homes for sale due to financial pressures.

Buyers who hesitate to actually make a purchase may miss this golden opportunity of optimizing their home purchasing power with low prices and interest rates. As has been observed, no one will ring a bell at the optimum moment, and it is only by looking back later are we able to see when the market turned. It may encourage buyers to remember and appreciate that they are primarily buying a home, not merely making an investment. Although real estate has proven to be an excellent long-term investment, homes are where people center their lives, make future plans, and create their dreams.

This is the time for serious buyers to be getting pre-approved by an experienced loan source so they are prepared in advance to make purchase offers. This will also give them more leverage in negotiations with a seller. Most prospective buyers already are doing considerable research on the internet, and many stop by open houses on weekends to become familiar with the inventory in person. It can also be helpful to use various property search sites such as Realtor.com, Search.LALuxuryHomesNow.com, and theMLS.com.

Once a buyer is ready to identify a specific home, they would do well to select a knowledgeable realtor who is an expert in that particular area. Such an agent can provide important information regarding specific neighborhoods, schools, and other important details about the various properties. A wise buyer will carefully interview prospective agents to be satisfied as to their experience, level of negotiating skills, and familiarity with the present challenging market.

With the anticipated increase in the number of new homes available which typically occurs in the early part of a new year, 2010 is sure to present some excellent opportunities. Happy home-buying!


For the past 24 years Michael Edlen has provided real estate counseling services to prospective buyers and sellers. More tips and information are available on MichaelEdlen.com. He can be reached at 310.230.7373 or Michael@MichaelEdlen.com.

Current Financial Pressures on Homeowners & Some Available Solutions

We have recently been asked more and more frequently what alternatives there are for people to try to maintain their homeownership under tremendously stressful situations. Correspondingly, many prospective buyers are “looking for a deal”, and think that it may be found in all situations where a home is being marketed as a short-sale. The short-sale of property occurs when the market value is less than the loan currently owed by the owner. The issues are complex and not simple to explain. The following gives an overall picture of the current market conditions.

The recent history behind the current foreclosure problems is well-known and it may appear that the problems are getting worse. A lot of the pressures are the result of five-year adjustable rate mortgages (A.R.M.s) that have been and are adjusting to higher rates of interest between 2008-2013. Additionally, job losses have contributed to even more pressure on homeowners even in Pacific Palisades. We have identified 10-12 bank-owned properties (R.E.O.s) in the Palisades which have not yet come on the market. The impact of such a small number will not likely affect market prices very much, although if the prices of these sales are significantly lower than previous comparable sales they eventually will have an impact on appraised values. More significantly, there are more than 30 additional local properties in various stages of pre-foreclosure which could present challenges to local market values later this year. Pre-foreclosure means a notice of default (N.O.D.) was filed against the property to indicate an owner is 30+ days late in making their mortgage payments. The lender could schedule a trustee sale within 120 days of the date the N.O.D. was filed. The trustee sale enables the lender to either sell it to a third-party buyer or buy the property themselves if no acceptable offer is made on the date of the trustee sale.

When homeowners experience financial stress, it is critical to identify a real estate agent who is knowledgeable and experienced in helping people become aware of various alternative solutions. Those who do not seek help in a timely manner quite often end up having even greater challenges down the road. A few of the local bank-owned homes were foreclosed at values significantly below the market value at that time. Some of these properties could have sold at higher prices and would have prevented the owners from having a foreclosure on their record had they been appropriately informed. The foreclosure could also delay their ability to purchase any other real estate for approximately seven years).

We were all surprised by the magnitude of the problems that have occurred and many people are experiencing serious challenges. Some agents have become expert in working with lenders on behalf of their clients toward various solutions. Some of us have had numerous experiences in actually negotiating short sales with lenders, and there are certifications that real estate agents can now qualify for to more expertly help their clients in these types of situations.

Not everyone facing a foreclosure can qualify for a short-sale. Those who don’t qualify for a short-sale may still be able to negotiate what is termed a “work-out” with their lender whereby they agree to pay the balance of their debt in a renegotiated manner. Contacting a real estate agent or attorney knowledgeable in the negotiation of short sales will start the process and help to identify which of these alternatives is an option available to them. There are many guidelines that can be utilized, and it is highly advisable for individuals considering a short sale to seek an experienced real estate agent’s advice regarding the feasibility of proceeding in this manner as soon as possible. Any real estate agent involved in this work must be organized, highly focused and, if possible, certified in working with people who are in a financially distressed situation.


Some real estate companies have prepared extensive informative materials to aid in educating people about the different alternatives available, procedures that must be followed, and guidelines for agents to maximize the probability of being successful in negotiating with the lenders on their clients’ behalf. The process is complex and challenging due to the tremendous log-jam of files that the banks’ loss mitigation personnel have to deal with. For this reason, it is also vital that any negotiations be done with great care and thorough adherence to the procedures that are essential for success.

While some buyers find excellent short sale purchase prices, it is not for those who are faint of heart or needing closure quickly. Although several lenders have streamlined the process recently, it can easily take up to several months for some to complete the approvals. Buyers who are not willing or able to be patient with this process may lose interest and withdraw their offer prematurely.

Bank-owned property sales differ from short sales in several respects. Buyers purchasing bank owned properties need to be prepared to take action swiftly, often pay more than the initial listing price, and unconditionally purchase the property in its present condition. Competitive bidding is not uncommon, and thinking they can get “a deal” because it is a bank sale is often a frustrating exercise.

The potential overhang of such types of properties in Pacific Palisades may be small enough that at the current rates of sales the increased inventory will be absorbed by the market without much negative impact. If dozens of foreclosures come on the market in a short period of time, however, there could be a fairly significant impact on prices.

For the past 24 years Michael Edlen has provided real estate counseling services to prospective buyers and sellers. More tips and information are available on MichaelEdlen.com. He can be reached at 310.230.7373 or Michael@MichaelEdlen.com.