It’s a few days before Christmas and most people are distracted from their usual obligations. There are far fewer real estate agents in the Calabasas office this week. We spent some time in our Woodland Hills office too and the scene was no different there with fewer Realtors occupying the offices. Home buyers are still excited about finding the right home but even the most motivated ones now have holiday travel interfering with their efforts. Those selling homes need a few extra hours to prepare for showings as they tuck the wrapping paper and extra groceries away to make their home presentable to show. It seems the market may be settling down for a long winters nap and many home sellers assume the market will awaken again in the spring. This year could be very different than the typical real estate patterns of the past.
You may have heard me speak about real estate market cycles in the past. The assumption is that things are a little slower in the winter and warm up in the spring and summer. The reality though is that these seasonal adjustments are augmented by larger economic and market adjustments. For example, during the heavy downturn of 2007-8 markets plowed down for years regardless of the season. In 2013 the winter months saw vibrant activity as the market rocketed higher. It’s easy to say this will happen when the market is shooting up or down but it also happens in subtler times. I have some predictions for this year’s market and I will use some examples from what I currently see in Calabasas, Woodland Hills and West Hills. These three markets are adjacent but represent different price points and types of housing inventory.
If you are looking for a home in the Mulwood section of Calabasas you are currently out of luck. There are currently zero homes available for sale. Mulwood is an area that always has high demand as many buyers prefer the schools. Current buyers are frantic! The buyers in the market are far more active than we usually see this time of year. I can assure you that a nice home in Mulwood would currently sell for near record price due to the low inventory. This would be an excellent time to sell. If we assume that the spring has more activity than let’s say, January, it would be safe to say that the price would be higher or it would be easier to sell in spring right? Maybe, but I don’t think so. Interest rates are on the rise. Not only have they been rising but the Fed has predicted four more rate hikes in 2017. I predict mortgage rates of 5% + by the end of 2017. Seriously. They are most certainly headed up and this will affect affordability. The second factor is competition. As prices have risen over the last several years there are now more people ready to sell. As they all prepare (and we have several clients doing so) to sell in the spring they may be faced with hefty competition from lots of other sellers. If I were selling my home, I would prefer no competition while rates are low and people are excited to selling when there is more competition and rates are higher. I call this a bird in hand at the top of the market.
As we scan the different areas and price points the story is similar in several market segments. The most sought after sections of Woodland Hills in the El Camino school area have near zero inventory and some of the nice homes that do come to market are setting record prices. Walnut Acres, the area of Woodland Hills with some of the largest homes and large lots, has almost zero activity yet a modest ranch home on a large lot just sold for a multiyear high price. In West Hills the Valley Park homes which are very similar in size and layout are often a good indicator of market sales because you can easily compare prices of homes that are so similar. There are very few available but some homes that sold for $600,000 not long ago are selling for near $700,000. There are many indications of strength in the economy and we feel it will be good for housing moving forward. Inventory and affordability will dictate prices however and looking forward those factors will most certainly not coordinate with market seasonality. There are many things to look at. Real estate markets are hard to predict.
Happy Holidays from Calabasas.
If you would like to discuss this post further you can reach Aaron Scott at: here