The lack of inventory is holding back market volume, not pricing. For most of the past four years, any time a great home hit the market, there were multiple offers and typically several all cash offers. This made it impossible for buyers who need to sell their current home to be competitive. Due to the huge annual appreciation, many owners opted to delay their selling plans to be able to enjoy the appreciation. As the huge annual appreciation we have experienced over the last four years has been tamped down to a flicker from a flame, more and more owners will take this opportunity to liquidate real estate. This will allow a lot of move up buyers to get into the game. Buyers that need to sell their home to buy their next property will bring more inventory to the market which in turn will spur even more sales.
In the past 9 months, the market seems to have slowed down. While the average time on market dramatically increased, the amount of inventory actually shrank. It is the lack of quality listings that has really slowed the market.
At times, up to 80% of local purchases are made by buyers who live in the immediate area. Buyers who a looking for more space, bigger bedrooms, a location closer to the beach or just trying to get into a better school district. There are buyers who have decided it is better to move up than remodel, buyers who now need a bigger home with a yard for the kids, or empty nesters who now can afford moving closer to the beach while downsizing the home. Due to the extremely high housing prices at the beach, the average South Bay home owner moves every 4-6 years. Steady job growth and public school performance here in the South Bay continues to drive demand across all price points.
Generally speaking, the closer a property is to the water, there we will see the most stability in housing values. Although the signs of an improving economy will be damped by an increase in interest rates, demographic shifts are bringing strong demand to the area and that consistency in the local markets. The affordability factor of Los Angeles County alone has seen mass migrations of average and first time home buyers moving out of LA towards the Inland Empire, Orange County, San Diego and Ventura. South Bay homes will continue to increase in value as jobs that support the affordability range in our area continue to flow into the expanding industries that surround the Beach Cities and Palos Verdes.
Our forecast for 2017 will be that as more listings come on the market, it will spur more buyers who need to sell their current home first, to list their homes for sale. This will create more inventory and more options for the move-up buyer.