If you’ve been following along, you know by now I like charts. I guess it’s the accountant/analyst in me, but charts basically represent a picture of data from a spreadsheet. The particular chart I’d like to discuss is the one above – pending sales through July 2017 for the entire Beach Cities and Palos Verdes Peninsula. The chart shows the peaks and valleys of pending sales since January 2008. Most of the peaks, representing the highest number of pending sales in a year, occur in April or May, and all but one of the lows occurs in December. What is unusual is the low point in 2017 is July, a time when pending sales is usually off 10-20% from the spring peak. So what is going on this year?
From the chart you can see that May 2017 was a record over the last 10 years for pending sales (503 homes), so you would expect June and July to follow with pending sales somewhere in the mid 400 range. But July hit a number of 238 pending sales, only 2 more than December of 2016! You can try and blame the dog days of summer, but that encompasses most of August. With June pendings down we saw overall closed sales drop proportionately in July. One can extrapolate from what transpired from lower June pendings to lower July closings, that August closings are going to drop to holiday levels. As for August pending sales, I wouldn’t expect much of a turnaround as many sellers are holding back inventory and many buyers are on vacation.
The Big Question
The big question surrounding this slowdown is how long will it last? When we look to outside markets, particularly Beverly Hills/LA and Orange County, the story is the same. Pending sales dropped significantly and as a result, closed sales are down as well. What about prices? Prices are edging down slightly compared to the spring months, but when we compare July 2017 to July 2016, prices are up across the board.
When push comes to shove, it’s going to come down to sellers. Buyers are out there, but they’ve clearly taken a step back. I suspect it’s record high prices (see the 3 month trend for the average price/foot below). We’ve seen record sales prices in just about every neighborhood from the Hill to the sand, and it seems buyers are growing weary of over paying. So it’s the sellers that are going to have to ask themselves how badly do they want to sell? Are they willing to ride the slowdown out, or is it time to lower prices to meet the demand? Of course, when everyone returns from summer break it could be a different scenario – we could buck the trend and pendings could climb back up to normal late summer/fall levels.
If you are a buyer, this may be the time to take advantage of low rates and higher levels of inventory. I’d take a good look at listings that have been on the market since late spring and see if you they are ripe to pick-off a deal.
See you in the neighborhood!