[vc_row][vc_column][vc_column_text] In our recent postings, we've spent a lot of time lately looking at the Commercial Real Estate market. Today, for a change-up, we're going to look at a portion of the Residential Real Estate market... specifically, the Arcadia housing market. In future posts we'll dissect other markets in our surrounding areas, but we thought this would be a good place to start as it's fairly illustrative of a lot of Southern California. To begin, let's look at some numbers and discuss what they mean. We'll be looking at statistics for the month of September.
Arcadia - Median Sale PriceMedian Sale Price September 2020 - $1,140,000 This is down from a 3 year high in Mar 2019 of $1,310,000. It is also down from a 5 year high in Jan 2017 of $1,510,000 Median prices since Mar 2019 high consolidating between $852,500 and $1,166,750. What we see in the price action is a market that hasn't actually stumbled yet, but that seems to be resting. It hit a high in March of 2019, and since then has been trending downwards. It dropped with a pandemic hit in April and May of this year, but did not approach the lows of August 2019 at all. It quickly recovered from the pandemic hit and is sitting at about the same spot as before. We've had a slight downward movement in this number since August, but median sales prices are still up 17.5% over last year.
Arcadia - Number Of Homes SoldHomes Sold September 2020 - 46 This is down from a 5 year high in Sept 2016 of 81 sold. This number has been in a general downward trend since then. These numbers clearly indicate a market that has been slowly cooling since September of 2016 when activity was at a 5-year high. A low spot in activity was seen in May of this year with only 18 homes sold. This corresponds with a time when most Buyers stood on the sidelines while everyone tried to figure out just what the pandemic meant to the real estate market. Some potential buyers were simply afraid to move in such an uncertain time, while others believed the market would fall apart and present a better buying window if they stood aside and gave it some time. So... activity was slow. That didn't last, however, and in June activity was again up at 45 and near the average for the last 5 years. September activity comes in at just 6.1% below September of last year. Again, these numbers are indicative of a market that has been turbulent, has stumbled around a bit, but that is strong and simply resting for a while.
Arcadia Housing - Days On The MarketMedian Days on the Market September 2020 - 52 This is down from a high in December 2018 of 112. It is up from a low in June 2020 of 38. These numbers are interesting. In February of this year... before real concern about the Covid 19 pandemic was on everyone's minds... the median days on the market for a listing in Arcadia was 87.5. Then, as the pandemic loomed, the time on the market went down to 61 and 62 days on the market in March and April, respectively. Then, in May it went back up to 87. Suddenly, in June, activity exploded and days on the market dropped to 38. It now sits at 52, having risen a bit. This is all very interesting. However, the DOM information on any market can be easily influenced by a small number of listings. In other words, if a small number of listings sell, and they sell fast, that can show on paper as a very favorable DOM statistic while really not reflecting much of importance in the market itself. All in all, this indicator has ranged between 112 DOM in December of 2018 and 36 in May of 2016. We are currently in the low 1/3 of that range.
Pricing NumbersSale to List Price - 98.2% - 1.2% higher than this time last year. Homes Sold Above List Price - 30.4% - 65.7% higher than this time last year. Home Sold After Price Drops - 13.4% - 22.2% higher than this time last year. These numbers are important if we are to understand what's going on here. Currently homes are selling for about 98.2% of the listing price. 30.4% sold over the listing price, and 13.4% sold after price reductions. The numbers for sale-to-list-price figures and for homes sold above listing price are just about average for the last 5 years. However, the number of homes sold after a price drop, at 13.4%, is just below the 5 year high at 14.2% in Sept of 2018. This upward trend began in March of this year and indicates that price decreases became necessary to induce Buyer action because of the pandemic. All of this adds up to a market that is "consolidating" and resting because Buyers are not as eager as they were a few months ago. Interest rates are still incredibly low, but the upcoming election and the pandemic has given rise to a "let's wait and see" type of attitude, and many Buyers are simply more comfortable standing aside for a while. At the same time, the number of price drops indicates that many sellers in the area are serious about selling their property. We need to keep in mind that much of the underlying economy of the area is fueled by monies derived from the Pacific Rim economies. That pipeline of easily transferable funds... money moving back and forth with ease... has been squeezed over the last few years. It is not as easy to transfer funds in and out of some Pacific Rim nations as it was 5 years ago. Additionally, there is uncertainty because of the election, as to how much more that economic pipeline might close down in the future. These pressures most probably contribute to some sellers dropping their prices in an effort to induce Buyer action, as they really want to get their properties sold.
Market SummaryWhen all these influences are added up, we have a housing market in Arcadia that is resting, but is in a precarious position. Currently, all the fundamentals are good, but there are frayed edges. The pandemic has caused some unexpected fluctuations. Political relationships with the Pacific Rim nations and the U.S. have thrown in a few more monkey wrenches, and overall anxiety about what comes after the election in November... no matter which way that goes... are all contributing to a picture of a market on stable ground, but standing next to a precipice. It's important to keep in mind that the Arcadia market, like most of Southern California's markets, has been largely driven by investor buyers rather than "live-in homeowners". As we discussed in our last post, much of the buying action over the last couple of years has been by individual and corporate investors purchasing properties with the intention of leasing them out long-term, or operating a short term "Airbnb" business. The "live-in" buyers have been standing to the side. It appears that the important number to focus on here is the number of price drops. If Sellers continue to drop their prices as they have been, we could move into a 5 year high with that number. That could mean a drastically changed market as the median price would follow suit. As stated above, this type of price reduction activity is done to induce Buyer action, and it could be instrumental in getting some of these "live-in" buyers to actually enter the market. However, the other uncertainties here are still pressing them to stand still. Where we go from here is anyone's guess. It's probable that we will see some movement in this very stable market after the November election. That resolution... however it goes... will release some pressure here. People will know which "style" of economic day-to-day activity to expect, and that simple "knowing" will probably bring about market movement. Once those potential "live-in" buyers make a clear decision to enter or stand back, we'll see where the market is going. If you are one of those who are watching and waiting, it would seem the prudent thing to do right now is to wait until the latter part of November to see if the market is going to move downwards. If the trend towards sellers lowering their prices continues at that time, lower prices could be on the way in December and January.
IMPORTANT NOTENow, all of what I just said is speaking from a strictly investment focused viewpoint. If you are a buyer looking to buy in the area... and you find the perfect home now... then realize that the market is stable, not volatile at this time, and perfect homes come along when they decide to come along. Whatever the market situation is... right now might be the time you are destined to purchase your dream home. Investors need to focus on getting the best market position when they purchase. "Live-in" homeowners... people who are going to buy their home and live in it and with it for years... will probably see more than one market turn-around while living there. The satisfaction of moving into and living in your perfect home over the years could well outweigh any minor market advantages or disadvantages waiting for the perfect "entry point" might provide. So, you'll need to weigh that question and decide, personally, if the home you've found is the right one, and what to do about it if it is. If you are looking for any kind of assistance in looking for or purchasing your dream home in the Arcadia or surrounding areas, we can help with that. Brion Costa, CCIM of C-21 Adams and Barnes in Monrovia is an expert in both residential and commercial real estate in the area. He's lived in the Arcadia area his entire life, and there is no one more qualified to help you with:
- Buying Decision - Whether To Buy Now Or Wait
- Property Location - Finding The Perfect Home
- Offer Negotiation - Writing, Presenting, and Negotiating
- Escrow Navigation - Contingencies, Inspections, Legalities
- Transition Assistance - Recommendations For Service Providers To Help With Your Move