Saturday, February 21, 2009

A Tale of Two Markets: Under $1 Million Bounce, Over $1 Million Fumble

Westside Los Angeles Home Sales $1 million+ 2007-2009

The percentage of homes listed at $1 million and above that are under contract in the Sunset Strip - Hollywood Hills West, West Hollywood, Beverly Center - Miracle Mile and Hancock Park - Wilshire areas has fallen to 4% – one in 25 homes.

18 - 24 months ago, 13 – 15% of homes in these areas were in contract – approximately one in 7 homes. At that time, jumbo mortgage rates and downpayment requirements were low, loan underwriting was lax and borrowers could rely on “stated” not “fully documented” income.

Westside Los Angeles Home Inventory $1 million+ 2007-2009 The current glacial market for properties priced $1 million and over in these areas is reflected in the months supply of inventory, which has risen from 4 – 6 months to 20 – 24 months over the past two years.

This trend will likely worsen as buyers are impacted by lay-offs and cutbacks in employment, high jumbo mortgage rates, and stringent loan underwriting requirements. Buyers have also been blind-sided by the economic crisis and are feeling less wealthy than they did one year ago.

Westside Los Angeles Home Inventory Under $1 million 2007-2009
The bright spot in the Sunset Strip - Hollywood Hills West, West Hollywood, Beverly Center-Miracle Mile and Hancock Park-Wilshire areas is that properties under $1 million are selling, and the market is picking up.

During the past 18 months, the market slackened from 3 – 6 months of inventory to 8 – 13 months of inventory, a much smaller drop-off than for higher priced properties in these areas. Based on January’s sales, there was only six months of inventory, a far cry from the 22 months of inventory for the over $1 million market.

Jamie Adner

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