Tuesday, February 13, 2007

San Fernando Valley Home Prices Up 6%

Despite the decrease in home sales, the median price of a single-family home rose 6.4 percent to a record high of $605,917 and the condominium median rose 8.5 percent to a record $349,917.

The fact that prices not only held firm, but showed modest gains during a period of slowing sales refutes claims that the residential resale market is in recession. This is good news for buyers, sellers, and the local economy.

"The price of homes in the San Fernando Valley during 2006 hit a point where buyers finally said 'Enough. No more.' and that's a good thing," said Winnie Davis, the 2007 president of the Southland Regional Association of Realtors. "Buyers simply refused to continue engaging in bidding wars with multiple contenders who were scratching over an extremely limited inventory."

"Now the market is working its way through a readjustment period," Davis said. "Sellers must post realistic asking prices and buyers finally have a wider selection and more options, but savvy buyers know not to expect deep discounts. Realtors really must educate buyers and sellers about the realities of this new, balanced market."

In fact, unlike some parts of the country where prices also rose to high to fast, no one is predicting a major downturn in the local market or a collapse in prices.

"2007 will see sales increase from last year, albeit not at the feverish pace of prior years, and there will continue to be modest increases in the median price," said Jim Link, the Association's executive vice president. "There is still plenty of demand for homes and sales will pick up as sellers and buyers adjust further to the new reality."

"The downturn in the market during 2006 was because buyers finally became price sensitive, not due to any underlying flaw in the economy, like in early 1990's" Link said. "To have multiple years of 20 percent plus appreciation was simply unsustainable."

The 6.4 percent increase in the single-family median price represented a $36,700 increase over the prior record of $569,208.

"What other investment offers a 6.4 percent annual return?" Link asked.

The annual median price during 2006 continued the dacade-long climb that began after the record low of $160,441 was set in 1996. However, the market went into overdrive in 2002 when 20 percent annual inflation first appeared. The largest annual increase in the single-family median price of 25.3 percent was posted in 2004.

Condominiums also saw resale prices skyrocket during the extended sellers' market.

The condominium annual median price rose to a record high during 2006, up 8.5 percent from the prior year to $394,917. The annual condo median has climbed every year since the record low of $85,334 set in 1996 with four years posting gains of more than 20 percent, including a 28.7 percent increase in 2003.

There were 5,213 active listings at the end of December, which at the current pace of sales represents a 4.7 month supply. At the height of the sellers' market the inventory often was at a less that 1-month supply.

A 4.7-month supply is below the 5 to 6 month inventory that real estate experts believe represents a balanced market, thus again tipping the market slightly in favor of sellers.

"We've probably seen the bottom of this downturn in sales activity," Link said. "While lenders have gotten stricter about their lending rules, all other economic factors - low interest rates, solid employment, strong economy - are in place to encourage people to buy a home."

Realtor Report
Southland Regional Association of Realtors

To search for all available homes for sale in the San Fernando Valley & Santa Clarita Valley, visit: http://www.homes.la

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