"Palos Verdes Resident since 1947"

November 2021 Newsletter

Dear Neighbor:

Out here on the front lines, real estate trends often become apparent before the pundits and the press pick up on them.  As I’ve pointed out before, what you read in the press is generally written by reporters not directly involved in real estate.  Not being “in the business”, they tend to use data on closed sales which, by definition, reflects what the market was 60-120 days ago – escrows average about 60 days in length, and the price obtained when the offer is accepted reflects the market at that time, tho it only becomes known 60 days or more later.  So the reports you hear/see in the press are out of date when they are published, especially in a dynamic market like we’ve had in the last few years.

Having said that, it is clear to most of us that the market is beginning to soften.  After almost 37 years in this business, I’ve seen a few of these cycles and recognize the signs:  houses that would have sold instantly 3 months ago aren’t; sellers and agents appearing to think that they can put the house out there at any price and it just sits there; price reductions; nervous buyers, thinking they may be buying at the peak, pulling out of escrows, etc. 

If you read these letters you know that I have been warning of this for months.  Somewhat counter-intuitively, Covid interrupted the historic real estate cycle, driving prices up by creating a shortage of houses for sale because a) sellers didn’t want hordes of people tromping thru their house, b) those contemplating moving into a retirement home had no place to go because all of those stopped accepting new residents by Spring of 2020, or c) the paperwork involved in showing houses was a hassle.  Of course historically low interest rates didn’t hurt either, but they had been low for a while.  Unaffected by outside forces (in this case Covid and the reaction to it), by early 2020 the market should have peaked.  I don’t know anyone who predicted the effect Covid would have on real estate, but if you own property in Southern California, you made a lot of money because of it.

So what now?  There is still a shortage of homes for sale, especially in the under $3 million price range and interest rates, tho rising, are still historically low.  The debt having been run up in response to Covid and the signs of creeping inflation, do not bode well for interest rates.  As you know, all else being equal, rising interest rates have a dampening effect on home prices.  If you’re considering selling, the odds of the prices declining in the next year or so are far greater than the odds that they will continue to rise.  Prices might continue to rise in the short term but, like calling the top or bottom of the stock market, doing so in the real estate market is a tricky business.  Having been involved in a number of these cycles, the downward side of them is no fun – every house sells for less than the last one and buyers, knowing that, simply wait for the next price reduction.  It’s OK if you’re selling and buying in the same market, but if you’re selling to retire or move out of the area, it’s no fun.

I’m happy to discuss any of this (or anything else) in person at your convenience.  I can be reached at 310 613-1076 or at [email protected].  Also, check out my website for the latest and for PV history.  I look forward to your call.


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