The current housing market is showing a divide in terms of the amount of growth taking place on the market. Overall, the less expensive the price, the less growth the market is experiencing. This has resulted in some vastly different experiences for those who are selling their homes within various markets, even within those that may just be separated by a few miles.

Examining Home Prices

When examining nationwide data, the number of homes priced below the $100,000 mark fell by 8.6 percent in January when compared to the previous year. At the same time, homes priced above $1 million saw an increase of 15 percent. According to experts, this divide has been caused by a number of different factors. For those homes on the low end, first-time buyers are just now starting to return to the market, thereby creating a slow recovery. After years of very little new construction, however, inventory within this price range remains tight. High-end buyers, on the other hand, are sensitive to the struggles that have occurred within the stock market this year.

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While some price points are experiencing limited inventory with increased demand, high-priced homes are not facing the same issue. As such, these homes are frequently found sitting on the market for a bit longer. When considering January’s sales pace, the National Association of Realtors reports that it will take about four months to exhaust the supply of existing homes for sale. In January 2015, the inventory was at about 4 ½ months, with six months considered a balanced market.

A Broken Supply and Demand

Typically, rising prices help to draw more sellers and builders into the market, but that trend has been much slower with low-priced homes. In fact, prices in the bottom third of homes increased by 38 percent between 2012 and 2015. During this same time, the number of homes dropped by 39 percent. On the other hand, prices increased by 23 percent in the upper third of homes while inventory increased by 36 percent.

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These figures are not consistent with what the laws of supply and demand generally stipulate. Furthermore, the situation has been exacerbated by the fact that some low-priced homes within the market have been foreclosed on, are vacant and are in need of extensive rehabilitation. As a result, potential buyers have been pushed to an even smaller subset of homes. Meanwhile, the percentage of homes sold within 30 days has returned to the housing boom peak, while the percentage of those that have been on the market for more than six months has increased by eight points when compared to the boom years.

Unfortunately, home builders do not seem to be too interested in addressing the entry-level market. Last year, the average size of a home increased to 3,720 square feet. The previous year, the average size was 2,660 square feet. Yet, sales have been slowing for homes priced at more than $500,000, causing some builders to look for lots on which they can build cheaper homes.

If you are interested in learning more about the Southern California real estate market, contact our team of luxury real estate experts. We specialize in high-end homes in the most exclusive communities and neighborhoods in the Los Angeles area.

  1. 4 beds, 3 baths
    Home size: 3,035 sq ft
    Lot size: 21,970 sqft
  2. 0 beds, 0 bath
    Home size: 6,153 sq ft
    Lot size: 6,360 sqft
  3. 5 beds, 5 baths
    Home size: 4,480 sq ft
    Lot size: 7,124 sqft
  4. 5 beds, 6 baths
    Home size: 4,530 sq ft
    Lot size: 6,500 sqft
  5. 5 beds, 4 baths
    Home size: 3,951 sq ft
    Lot size: 6,100 sqft

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(all data current as of 11/20/2017)

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