Nationwide, there was a 9.6% increase in home sales in September, spurred by buyers rushing to make use of the $8,000 federal tax credit, which expires November 30 (and amounts to nearly 5% of the average US home price of $174,900). Prices are down (8.5% since last September), and the country's residential real estate market seems to be regaining its footing after faltering for over two years. [Bloomberg.com]
Of course, real estate markets are hyperlocal, and what's going on in Cleveland has little to do with what's happening in Los Angeles. The results are surprising: despite record layoffs, foreclosures and whittling of 401Ks, the market is tightening in Los Angeles -- and by many measures is a competitive one.
We looked at a central slice of Los Angeles that includes Beverly Center-Miracle Mile, Hancock Park - Wilshire, Hollywood Hills East, Los Feliz, Silver Lake - Echo Park, Sunset Strip - Hollywood Hills West, and West Hollywood, and examined the months supply of inventory over the past two years.
For single family homes over $1 million, there is currently a ten-month supply of inventory. The inventory has been trending down since the beginning of the year and now stands near two-year lows. In this price range, the market is not "hot" but has been consistently improving.
The under $1 million market tells a different story. Inventory has been trending down for two years, and there is now a 3.5 month supply of homes in these neighborhoods. This is a "hot" market characterized by motivated buyers who are pursuing a limited supply of homes. In many cases, there are multiple offers on properties.
Other signs point to the health of the market. Consider the median days on the market for all homes sold in the past three months in the following markets:
- Los Feliz -- 29
- Silver Lake - Echo Park -- 31
- Hancock Park - Wilshire -- 40
- West Hollywood -- 46
- Hollywood Hills East -- 56
- Beverly Center - Miracle Mile -- 60
- Sunset Strip - Hollywood Hills West -- 76
Some forces may derail this recovery. Persistent high unemployment could curtail homeowners' ability to pay their mortgages. This may lead to an increased number of foreclosures, short sales and home sales on the market. This negative economic environment could sap buyers' appetite for making purchases.
Changes in the mortgage market where buyers benefit from record low interest rates could also dampen buyer enthusiasm.
On the other hand, nascent signs of economic recovery -- profits in the banking and high-tech sectors, a decrease in job losses, and a rise in the stock market -- could continue, supporting the housing recovery.
What do you think? A decade from now, will homeowners recount how they "bought in 2009" at the bottom of the market?