Palos Verdes Market Review – Is a Crash Coming?

Is a Crash Coming?
For those keeping an eye on the real estate market, the market is continuing its torrid pace. The median price of a home in Palos Verdes Estates ($2.3m) is up 25% over the past year, and as a result, I am starting to hear the question, “Will there be a crash?” While my crystal ball is still at the repair shop, I will attempt to answer this question based on what we know about the market so far this year.

It’s all about Supply and Demand Currently buyer demand is outpacing seller supply. How do we know? With only a few exceptions, most properties have seen multiple offers in the past 12 months. The numbers are hard to track, but my best estimate is the number of offers on a property is currently averaging around 7. Clearly there aren’t enough homes on the market to meet the buyer demand.

Skin in the Game Since the last market crash ended in 2012, lenders have tightened their loan requirements, and as a result, most buyers have bought with 20% or more down. This results in “more skin in the game” and a reduced likelihood of buyers losing their homes to foreclosure. After all, who wants to walk away from hundreds of thousands in equity if you can find a way to make it work?

The buyer pool has increased It has been a growing trend over the last few years, but since the pandemic, more buyers are looking at Palos Verdes as their place to call home. With more companies offering hybrid work models and allowing more employees to work from home, not needing to be as close to the office has opened up Palos Verdes to many new potential buyers. As a result, the current price growth and demand will remain sustainable longer than expected.

The Palos Verdes Buyer Profiled

Who is buying homes in PVE?  I’ve taken a look at the 145 sales in 2021, and this is what we know about the Palos Verdes Estates home buyer in 2021.

  • Many of buyers are families with school aged children
  • 63% of the homes have sold at or over the list price with multiple offers
  • At least 29% of homes have sold for all cash
  • Month’s Supply: Homes under $3m – 1.1 months; over $3m – over 2.8 months 
  • Average Days on Market: 34 (based on 2021 Closed Sales)
  • Closed price/Original List price: 101% (based on 2021 Sales)

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