By Michael Edlen
Special to the Palisades News
Potential home buyers who are hesitant or undecided about the timing of purchasing a home often feel that current prices are too high, or are about to fall.
While average Westside home sale prices are now at all-time high levels and the inventory of homes available is still relatively insufficient to meet the demand, there are several reasons why buyers might do well to reconsider their decisions about waiting for a hopefully “better” time.
Here are seven reasons why now may actually be the best time to buy:
1. Although this is still technically a market that favors sellers, due to there being less than five months of inventory available for sale at the current rate of purchasing in Pacific Palisades, the ratio has begun to shift.
For several months the Palisades had a 2.5- month level of inventory. Today it is up to 3.5 months. This indicates somewhat more homes on the market as compared with the number of homes being sold each month.
2. The main driving force in the market continues to be an unprecedented four-year period of near-historic low interest rates.
3. Because most homes are purchased using 75 to 80 percent bank financing, the actual monthly cost of a home is much less now than it will be once interest rates do increase. In fact, a substantial number of prospective buyers will not be able to be approved for a loan once the rates increase even by only one percent. This is because their monthly cost will then be 25 percent higher than a typical four-percent interest rate loan would be today!
4. Even when home prices do come down as most will eventually, it would need to be at least 20 to 25 percent to equalize the higher monthly payments resulting from interest rates above five percent. Long-term interest rate charts show that seven to nine percent is much more typical than four to five percent, and occasionally have been in the 14 to 20 percent range!
5. The anticipation of Caruso’s Palisades Village project completion in 2018 has resulted in a substantial increase in the numbers of people wanting to live near there. Logically the growing appeal will result in even greater price pressure for at least a few more years, and even the outlying sections of the Palisades have seen prices moving up.
6. During the winter season, many homeowners who have not yet succeeded in selling become more flexible in negotiating. This can result in more opportunities that benefit buyers who are ready to take action.
7. Of course, in one respect, the best time to buy a house is always “now.” Since it is usually a purchase of one’s home, the sooner it is bought the sooner it can be enjoyed and the buyer can also enjoy the financial benefits of home ownership such as equity build-up.
The reasons above are magnified by a growing trend for people to remain living in their homes for a longer time. And many families have elected to retain homes until the owners pass on, for both personal and tax reasons. The results of these factors restrain the possible supply of new homes coming on the market.
Thus, potential buyers have many reasons to seriously consider buying their new home as soon as they find a good fit, even if it may involve some compromise and probably paying somewhat more than they had planned.
Michael Edlen has been involved in nearly 3,000 contract negotiations and ranked among the top 100 agents in the country. Call (310) 230-7373 or Michael@michaeledlen.com.
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