Wednesday, May 16, 2007

San Fernando Valley Market Update for May 2007

San Fernando Valley home resale activity remains strong.
By: Winnie Davis, SRAR President & David Walker

Even as some buyers hesitated due to fears over the impact on the market of potential problems with a limited number of high-risk home loans, sales activity in the San Fernando Valley came in stronger than expected for the first quarter of 2007, the Southland Regional Association of Realtors reported recently.

And, resale prices have adjusted to the more methodical activity level with a modest decline, the association also reported.

"Perceptions have no matched the realities on the ground when it comes to local home sales and prices," said Winnie Davis, president of the Southland Regional Association of Realtors. " A sharp drop in sales or prices has not happened and seems unlikely. Smart home buyers understand that today's wealth of opportunities outweigh and potential risk, especially if you're buying a home with the intent of staying in it for years to come."

Yet a steady drum beat of reports regarding potential problems in the so-called subprime loan market - where a limited number of loans were made to buyers with weak credit histories - have prompted some buyers to sit on the sidelines when they might be better served by jumping in while interest rates remain near historical lows.

"Publicity about an impending down market may be a self-fulfilling prophecy, but right now the numbers do not indicate that either prices or sales are plummeting," said Jim Link, the Association's executive vice president. "We believe home resale prices will stay pretty flat or go down slightly, but not enough to warrant waiting a long time to buy."

Indeed the median price of the 1,867 homes sold during the first quarter 2007 was off less than 1 percent to $606,000. The 1st quarter 2006 single-family median price was $607,700. Likewise, he condominium median price of $393,000 was down a modest 2.1 percent.

The median price reported for the single-family homes sold during March was of 3.3 percent while the condominiums median was unchanged from the prior year.

Link and Davis said that too many consumers also believe incorrectly that the number of homes listed for sale has tipped the balance in favor of buyers.

True, the number of active listings has increased, rising 27.6 percent during the 1st quarter to $5716 properties. Yet the market had been so hot and the inventory driven so low for so many years that any increase now seems to be dramatic.

However, at the current pace of sales, the 5716 active listings represented a 5.2-month supply. That compares to a 3.6-month supply for the same period of 2006.

"A balanced market, where buyers and sellers are on equal footing, in near a 5-6 month supply," link said. "Over the last 20 years the average has been a 6.7 month supply."

During the depths of the national recession of the 1990s the inventory hit a record high of 14,976 active listings, which was a 17.6 month supply at the then current pace of sales.

That was a true buyers' market, Link said, but today's 5.2 month supply offers opportunities, risks and rewards for buyers and sellers equally.

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