Southern California Prices Up, Shadow Inventory Remains a Problem
The LA Times reported that Southern California real estate has seen some improvement over the last year. Real estate experts, however, caution that there are still problems in the market and that there is still some recovery that needs to occur before the market is back at full strength.
Luxury home prices, partially on demand by overseas investors, did recover somewhat. According to the article, however, the increase in prices, to some extent, only represents those prices getting back to expected levels rather than genuine increases in value.
Inventories were reported to be at the luxury end of the market, though there can be issues with these figures that are not readily apparent. For example, some homeowners may be hanging onto their houses waiting for prices to increase so that they can put them on the market. There are also homes in foreclosure that have not been put on the market yet. These are what realtors refer to as shadow inventory and, in any market, shadow inventory represents a variable that is hard to quantify when determining the overall health of the market.
Even though there are hurdles to overcome, the recovery of the luxury end of the spectrum is definitely an improvement over the market even a few years ago. In the LA Times article, realtors report that homes that were in need of repair were in high demand and that their clients, specifically those clients from overseas, were not too choosy about where the homes they purchased were located.
Increases in the median price are also not always as telling as they may seem. When many properties sell above the median price, they can pull that median price up higher, despite the fact that homes priced below the median may be selling very slowly or not at all.
However much shadow inventory might be a problem, the realtors quoted in the article do, to some extent, credit the lack of inventory as making buyers quite a bit more flexible in terms of where the properties they purchase are located. Some areas had a turnaround that would be impressive in any economy. For example, the article shows a 7.3 percent increase in prices in the 90210 ZIP code of Beverly Hills. In the previous year, there was a 1.7 percent decrease in the median value of homes. To demonstrate the fact that some of these homes are merely recovering and not increasing in price, the article also mentions that, in 2009, Beverly Hills had a 15.8 percent drop in the median value of its homes.