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Health & Fitness

A Year in Review--The 2011 South Bay Real Estate Market

Ed Kaminsky of Shorewood Realtors, Manhattan Beach reviews the 2011 Real Estate market and suggests what the 2012 market might bring.

A YEAR IN REVIEW--The 2011 South Bay Real Estate Market

What happened?

Real estate trends are easy to explain when they have already happened; projecting them is an entirely different challenge. There is no question that the current trend of declining prices and distressed sellers has been at the top of discussions for almost five years already. 2011 has continued to see foreclosures coming to market, an increase in "short sale" sellers (sellers with no equity or negative equity, and a slight decline in overall real estate values. 

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Here locally, in the South Bay, the most interesting trend in 2011 is a dramatic drop in inventory levels: over a 35% actual drop in inventory year over year. In October of 2010 there were 4,435 homes for sale and in October 2011 there were only 2,828 for sale. Another interesting fact is that in October 2010, 633 homes went under contract and in October 2011 934 went under contract. A 30% increase in pending sales combined with a decrease in inventory points to the supply of homes running surprisingly low.

What will happen?

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Should this trend continue we could finally see a stabilization of real estate prices. The stabilization of prices can increase buyer confidence and reverse the downward trend of values. Inventory is one factor that controls pricing but there are outside influences forthcoming in 2012 that can contribute to an adverse effect. A pending Presidential election historically stalls buyers and sellers from making a decision. Also, the overall economy affects people’s decisions including, but not limited to, unemployment issues and the state of the job market.

The tightening of the lending market is continuing to wreak havoc on buyers trying to obtain financing. Nationally the fall out factor on pending sales is as high as 30%--meaning that almost one third of sales consummated ultimately never close.  Research shows that most of these fallen escrows are due to buyers not qualifying for loans, or properties not appraising at the accepted sales price.

The projection for foreclosures in 2012 is still expected to be at record levels. In addition "short sales" are still ringing in at a record pace, continuing to affect overall market statistics, appraisals, and listing prices.

What should you do?

On a more positive note, home affordability is at the highest point in over a decade and this is certainly evident in the South Bay. This is due in part to the median price of homes coming down dramatically from their peak prices in 2006, as well as interest rates being at historical lows. Should interest rates remain low, this could easily create the optimum buying opportunity in real estate that many have been hoping for in over a decade.

For move-up sellers, the timing couldn't be much better. Even though they may be realizing losses, sellers who become buyers in the same marketplace increase their upside potential for profit dramatically. My usual advice for sellers is that the best time to sell is when the motivating reason to move outweighs everything else. In other words, you may have been relocated for a better job, your home is simply too big and the maintenance is not worth the hassle, or you may desire to move closer to family. The list of reasons why homeowners choose to sell is endless. Always analyze your choices and reasons in order to make a sound decision.

What to do in 2012? If you are a buyer, get qualified by a reputable lender and buy within your budget. For sellers, seek out a knowledgeable agent that understands the market and knows how to reach buyers quickly and efficiently. Identify through your agent the true market value of your property. Overpriced properties, even in an improving market, simply will not sell. Be sure to thoroughly weigh your personal pros and cons of selling then make your decision.

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