Where’s the market headed in Glendale, Ca?
In order to talk about what is coming, we have to talk about what just happened. Here, in Glendale, CA, the first quarter of 2012 held much hope and promise for the residential real estate market. Interest rates were at rock bottom, there were signs that the economy was picking up and eager buyers, loaded with cash, were stalking open houses. How did everything turn out?
It is Tough for Buyers!
First, let’s take a look at the overall market for single family homes in Glendale CA. Inventory levels were at an all time low in January, but things did not improve through February and March, staying flat at about 145 homes. That is a 145 homes for sale in a city with nearly 200,000 residents. Yikes!
Normally we would start to see a marked increase in inventory starting in March- not only did that NOT happen, but today, April 17th, we are down to just 132 homes to sell.
Buyers- I really feel for you. Every news organization in the world says you should be sitting in the catbird’s seat- and that is just not the case in our fair city. On top of this, you have to listen to every smug bastard (otherwise known as your friends and relatives) who tell you about the “fantastic bargain” they (or their co-worker) just scored.
You’ve just been beat out (again) by an all cash buyer when your personal Smug Bastard says, “My friend just closed on a sweet Bank Owned Home- 3000 SF on an acre lot. They were asking $650k but my friend scooped it for $350,000!” (Insert scream)
News Flash. Some of them lie. Just sayin’.
It’s Also Tough For Sellers!
Here’s the thing, opening escrow is NOT the same as closing. The only people selling their homes, today, are the ones who need to sell. And one out of every three open escrows fall apart before closing. The ones that do stick are taking 2 – 3 times longer to close escrow. That is a lot of drama and stress for everyone, but arguably, it is hardest on the seller.
The number of homes that entered escrow zoomed way up as buyers started buying homes they had previously rejected. Short sales, major fixers and homes in busier locations are all starting to attract offers- as long as they are priced accordingly. We went from 56 that opened escrow in January to 75 opening in March, a 25% increase.
However, the number of homes CLOSING escrow has stayed roughly the same (about 50 a month). Now, why is this happening?
Man- this is where the drama happens. Deals are so complicated these days! The problems come in two categories, lender problems (including appraisals) and people problems (including the Realtors).
Lender problems have been well documented. Short sales are long and complicated, appraisals miss their mark and lenders are taking a monkey’s age to do ANYthing.
As far as the people- well, everyone is stretched very thin. The slightest problem is cause for both buyer and seller to react emotionally. Added to that is my general experience that the Realtor population actually seems LESS able to problem solve and this, too, leads to outsized drama. Drama leads to deals taking longer to close or just falling apart altogether.
The gap between the number of open escrows and the number of closed escrows has never been so wide or lasted for so many months. This is trend worth watching.
All Homes Are Not Equal
I think it is silly to assume that the general business trends of a city completely relates to your particular situation. I could spend all day talking about how all this relates to just YOU, (insert your name here), but then the rest of my Readers would get bored. So, let’s break this down into price categories.
Most of the drama, this quarter, comes from this segment of the inventory. The number of listings is flat, but the homes entering escrow rose sharply- nearly equalling the number of homes that are active. This means, if you are a buyer in this category, the number of active buyers and active listings is nearly equal. Worse news? A bunch of those buyers are investors with 500,000 dollar bills in their pockets. Cheeky Buggers. Wish I had some of that cash.
The number of closings are flat for the quarter- this tells us that these escrows are the hardest to close. That makes sense as 42% of the sales closed in this segment are short sales- the citywide percentage is 25%. If you factor in bank owned properties 66% of all the sales in this segment are distressed properties.
All of these sales and no inventory- prices must be going up,right? Wrong! Prices are mostly flat, although there are signs that prices might be edging up a tiny bit.
Between $500,000 and $750,000
The drama continues, but in a lesser form, in this next segment. Inventory levels are flat, number of homes in escrow is up and the closings are also flat. There are more homes for sale in this category than the lower priced one, so the numbers are not quite as dramatic. Unsurprisingly, short sales are a far less important factor, 10 out of the 56 sales or just under 18%
This is a very tricky segment! There are more homes with a “for sale” sign out front, but many of them are NOT priced to today’s market. I think the inventory of salable homes is just as challenging here as they are in the lower price segment. Days on Market are sky rocketing as buyers prefer to wait for fresh opportunities. Prices are declining- but just slightly.
Between $750,000 and $1,000,000
This is a segment of discretionary buyers and sellers. Most of these folks don’t NEED to buy and sell, they want to. There is uniform good news in this segment! Everything is up- inventory, escrows, closings, even prices are up a little bit! Distressed sales exist in this segment, but they are a rarity, not the norm- just 3 short sales and 2 bank owned out of 34 sales.
Things get out of balance on this side of the coin. We have lots of homes of sale and very few that can, or will, buy them. Financing is very difficult in this price range, so we are looking for buyers with oodles of cash and a willingness to plunk it all down on a fancy house. In Glendale. Not that I don’t think that’s a great idea. I hear Kim Kardashian is looking to buy. She says she wants to run for Mayor. (I wish I was joking. You can not make this stuff up) Anyone know her business manager and can hook a gal up?
What Will Next Quarter Bring?
I have no freakin’ idea. Really.
I know that 1 out of 3 mortgages in Glendale are underwater. That does NOT mean that 33% of you are in financial distress. Many of you are doing just fine, thank-you-very-much. But, will this lead to more short sales and foreclosures and a downturn in prices? Maybe.
I know that there is a massive amount of money out there. Every listing I put out gets at least one all cash offer. I know there is tremendous pent up buyer demand and financing, at least in our normal price range, is relatively cheap and easy to get. Will this mean prices will go up as consumer confidence grows? Maybe.
Rents are going up and are getting hard to find. When you factor in the cost of a cheap mortgage, renting can look pretty silly, from a cash flow point of view. Will this mean first time buyers will flood the market and push condo prices up? Maybe.
Look- I am just not going to sit here and tell you it is time to buy/sell or else you will miss your window. All I will say is, do you want/need to buy or sell? Can you afford to do it now? Then do it. Because tomorrow? Well, I just have no freakin’ idea.